Eurozone Economic Outlook Is Neutral, ECB Meeting Minutes Show

European central bank releases meeting minutes from March monetary policy meeting

Minutes show that there is an increasing consensus among officials that the economic outlook is improving

Despite the shift in the outlook, most officials are wary of sending the wrong tightening conditions prematurely

March meeting minutes suggest that a continued recovery over the next few months could bring more confidence among ECB officials to strike a hawkish tone

European Central Bank Meeting Minutes

European central bank officials aired their difference of opinion on the strength of the recovery in the Eurozone economy with some suggesting that the central bank must start to rein in the bank’s balance sheet, meeting minutes from the March ECB meeting showed last week.

Central bank officials were, however, optimistic that the economy might be improving but were wary of sending the wrong signals about tightening conditions that could potentially backfire.

The meeting minutes showed that most officials agreed that the economic risks were to be characterized as being “broadly balanced” but some members pointed out that there were still significant downside risks to the economy.

ECB officials continue to remain divided on policy

There were, however, some dissenters within the ECB’s governing council, with the minutes revealing that there was at least one member that suggested that the central bank should drop its pledge to boost stimulus again if the outlook deteriorated.

But other members suggested that such a measure was not necessary with the pledge eventually left unchanged in March as officials believed that changing the message would send the wrong signal to the market.

ECB officials have been caught with mixed signals from the economy. While inflation data in the first two months of the year showed acceleration towards the ECB’s inflation target of 2%, subsequent data suggested a pullback to the strong pace of increase registered previously.