The short-form accounts of the ECB's January meeting showed that there was broad agreement to make no changes whatsoever to the policy stance. Some members expressed a preference for dropping the easing bias regarding the Asset Purchase Programme (APP) from the Governing Council's communication as a tangible reflection of reinforced confidence in a sustained adjustment of the path of inflation. However, the bottom line is that the majority wanted to see hard evidence of this before making any adjustments.
January's announcement took some by surprise. No one was expecting any changes to the E30 billion monthly net QE asset purchases and there was never any chance of a move on interest rates. However, some analysts had anticipated a slightly less accommodative line on forward guidance or, less likely, even the declaration of a definitive cut-off date for the APP. But, while acknowledging the strengthening upswing in the real economy, the ECB clearly remains very wary of doing anything that might jeopardise the (limited) progress made so far towards meeting its price stability goals.
Indeed, the Council noted the need for steady communication and to ensure that future changes to forward guidance should be adopted with a view to avoiding abrupt or disorderly consequences at a later stage. It was emphasised that monetary policy had to remain patient and persistent, while prudence should be exercised with respect to the Council's communication.
The other main point of note was the focus on the exchange rate. The recent volatility of the euro was seen as a concern and a source of uncertainty that had to be monitored with respect to its implications for the medium-term outlook for price stability. In this context, it was also seen as important to reaffirm the agreed G7 and G20 exchange rate language, which entailed the commitment to market-determined exchange rates and refraining from targeting them for competitive purposes.
In sum, the minutes suggest no near-term move on forward guidance and with QE and interest rates seemingly fixed through at least September, the next few Council meetings look unlikely to be very exciting. Still, pressure to drop the easing bias is building and this is likely to be the first step on an increasingly less accommodative monetary path as and when the next recalibration finally takes place.