ECB Minutes: Policymakers Saw Need For ‘Free Hand’ In Monetary Policy Amid High Uncertainty
European Central Bank policymakers saw the need for latitude in monetary policy to tackle the difficult economic situation as the outlook remains highly uncertain in the absence of a permanent cure for the coronavirus and political factors such as Brexit transition and US presidential election, minutes of the September policy meeting showed on Thursday.
“In the prevailing environment of high uncertainty, keeping a steady hand with respect to monetary policy was seen as most appropriate,” the minutes, which the ECB calls “account”, of the September 9-10 Governing Council meeting showed.
“At the same time, the case was made for keeping a “free hand” in view of the elevated uncertainty, underpinning the need to carefully assess all incoming information, including the euro exchange rate, and to maintain flexibility in taking appropriate policy action if and when needed.”
Rate-setters stressed that the Covid-19 pandemic situation, the ongoing Brexit deal negotiations, US presidential election and fiscal policy decisions of euro area member countries must be closely monitored.
The ECB hopes to reduce the pace of monthly asset purchases under its Pandemic Emergency Purchase Programme,or PEPP, as the tensions in financial markets subside, to allow to build buffers against future crises.
In the September policy session, the central bank left its key interest rates and its PEPP unchanged, and reaffirmed its forward guidance.
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