(Reuters) – European policymakers do not believe urgent rate cuts are needed, but the issue is likely to be discussed at their September meeting, minutes of the European Central Bank’s latest policy meeting showed on Thursday.
“A gradual easing of monetary restrictions is a balancing act, as it is important not to cause unnecessary damage to the economy by keeping rates at restrictive levels for too long. It is “(…) very important to keep an eye on the real economy,” the minutes of the July 17-18 meeting said.
“The September meeting is the one at which the level of monetary policy restriction should be reassessed, according to the majority of opinions. We will have to keep an open mind when we arrive at this meeting,” the minutes state.
Markets now estimate a 25 basis point cut in September as 90% likely, as negotiated wage growth slowed sharply in the second quarter and the German economy shows signs of recession.
This slowdown in wage growth, one of the indicators most closely monitored by the ECB, has reassured monetary officials.
“It is reassuring to see that price pressures from wage increases are increasingly being absorbed by profits,” the report shows.
Participants at the meeting also believe that inflation is returning to its target, and should reach 2% by the end of next year.
The ECB kept rates unchanged in July and gave almost no indication of the future path of its rates.
(Reporting by Balazs Koranyi, by Corentin Chappron, edited by Kate Entringer)
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