The short-form minutes of the ECB's March discussions contain no real surprises and confirm a general, but not unanimous, preparedness to keep policy on hold. The bottom line was that domestic and global economic uncertainties together with still muted underlying inflation pressures called for caution and underlined the need to maintain a stance built upon prudence, patience and persistence.
However, increasing confidence in the Eurozone's economic recovery and, in turn, the inflation outlook, was seen as justifying the removal of the longstanding easing bias. Even then though, it was noted that the move should not be misunderstood as restricting the Governing Council's capacity to react to shocks and contingencies, if necessary.
Nonetheless, more recent comments have underscored growing policy differences on the Governing Council. Just a couple of days ago, the head of the Austrian central bank, Ewald Nowotny, called for a faster pace of normalisation and went so far as to suggest that the ECB's first move could be a 0.2 percentage point hike in the deposit rate to minus 0.2 percent. Current forward guidance says interest rates will not be raised until well after the end of the QE programme, which is currently only tentatively slated for September.
Such splits look likely to widen over coming months unless the apparent slowdown in economic activity last quarter is sustained into the second half of the year.