Hardly stating anything new to those who have seen the recent collapse in the Citigroup Euro Econ Surprise Index, which has recently plunged tumbled to the lowest level observed since the 2011 sovereign debt crisis…
… this morning the ECB the released minutes from its 25-26 Governing Council meeting, in which “it was widely cautioned that the uncertainty around the outlook had increased since the March monetary policy meeting” and that “a more pronounced weakening of demand, notably related to external factors, could therefore not be ruled out.“
Confirming the cautious tone from the ECB’s April meeting, the key highlights from the minutes confirm that the ECB is becoming increasingly sour on the outlook, with the threat of protectionism once again receiving the highest billing: “in particular, risks related to global factors, including the threat of increased protectionism, had become more prominent and warranted monitoring with regard to their implications for the medium-term outlook for growth and prices.”
The ECB also warned of violent FX moves: “It was also remarked that turbulent trade relations had the potential to give rise to disorderly movements in exchange rates and to heightened volatility in financial markets”
For now the outlook remains the same but that cah change: while “it was underlined that the signs of a moderation in economic growth at the start of the year did not change the picture regarding the underlying pace of expansion,” officials agreed that “data releases ahead of the June monetary policy meeting would need to be carefully scrutinized to better understand the sources of the recent moderation in growth”
The good news – stronger wages: “Some comfort was drawn from encouraging signs of a strengthening in nominal wage growth and the continued anchoring of long-term inflation expectations”
But not strong enough, as overall inflation remains weak: “While a view was expressed that the Governing Council’s criteria for a sustained adjustment in the path of inflation could be considered as close to being satisfied over a medium-term horizon, there was broad agreement that the evidence remained insufficient at the current stage.”
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Whether because most traders are already out for the holiday weekend, or “just because”, there was hardly any market reaction to the minutes: as RanSquawk notes, at the post-meeting press conference, President Draghi said that the ECB discussed little directly on monetary policy “per se”, and that seems to be reflected in the minutes, and accordingly, the market reaction.
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