“The September meeting was widely seen (by ECB board members) as a good time to re-evaluate the level of monetary-policy restriction,” according to the summary, published yesterday, of their July meeting.
“That meeting should be approached with an open mind, which also implied that data dependence was not equivalent to being overly focused on specific, single data points,” the summary of minutes said.
Rate setters hold their next policy meeting on September 12, when they are widely expected to reduce interest rates by a further quarter of one percent following their first cut in June after ramping up borrowing costs in 2022 and 2023.
A September cut will likely bring the key ECB deposit rate down to 3.5pc but the pace and scale of further reductions are harder to predict.
Italy’s central bank chief, Fabio Panetta, suggested it was realistic to expect further interest-rate cuts beyond next month. “It is reasonable to think that we are going toward a phase of loosening of monetary policy,” he said on Wednesday, in Rimini, Italy.
On financial markets, investors see a 90pc probability of a cut next month, which would have a direct impact on tracker mortgage customers and a less direct effect for other borrowers, as well as potentially for savers.
While forecasts of the pace of inflation falls have been the key driver of rate decisions, there are increasing risks to Europe’s growth outlook that reinforce the case for a reduction in borrowing costs next month, according to Finnish central bank chief and ECB governing council member Olli Rehn.
Yesterday a key gauge of eurozone wages eased. bolstering that case.
Second-quarter negotiated pay rose 3.6pc from a year ago, the ECB said yesterday, down from 4.7pc in the previous three months and broadly in line with estimates from Bloomberg Economics, as well as analysts at Morgan Stanley and Citi.
Officials will receive further details on workers’ pay, as well as this month’s inflation reading and economic projections through 2025.
While policymakers led by ECB president Christine Lagarde left little doubt before their summer break that borrowing costs would fall further this year, uncertainty has meant they haven’t committed to when and by how much.
The growth outlook for the euro area’s 20-nation economy has since soured.
Germany, the bloc’s largest member, saw output unexpectedly contract in the second quarter.
