ECB accounts show cautious stance on further policy easing

FRANKFURT (Reuters) – European Central Bank policymakers appeared content with the drop in inflation when they met last month but argued for a gradual policy easing given lingering domestic price pressures, the accounts of their Sept 12 policy meeting showed on Thursday.

The ECB cut interest rates last month and said it would keep an open mind about October but a long list of policymakers have already made the case for a follow up move, suggesting that the a cut next week is all but a done deal and the real debate will be about December.

“The baseline path to 2% depended critically on lower wage growth as well as on an acceleration of productivity growth towards rates not seen for many years and above historical averages,” the ECB said in the accounts.

“It therefore needed to be carefully monitored whether inflation would settle sustainable at the target in a timely manner. The risk of delays in reaching the ECB’s target was seen to warrant some caution to avoid dialling back policy restriction prematurely,” the ECB added.

The bank has cut interest rates twice already as inflation is now within striking distance of its 2% target and said that further easing is only a question of timing given weak growth, easing price pressures and slowing wage growth.

The bank next meets on Oct 17 and a cut is almost fully priced in with a December move also firmly expected.