This is a meeting that took place on June 9th. It marked a turning point in the accommodating policy pursued by the European Central Bank (ECB) in recent years: it was during this meeting that an increase in key rates of 25 basis points was announced in July and other increases in the following months, in order to combat record inflation. This is the first key rate hike in eleven years. This move was expected as most major central banks have already started raising rates.

According to the minutes of the last meeting published this Thursday, July 7, the ECB advocates a “gradual” tightening of monetary policy, but does not rule out increases in tranches of more than 25 basis points if necessary. “Gradualism should not necessarily be interpreted as slow action in small steps,” the euro guardians agreed at their June 9 meeting, excerpts from which the Frankfurt institution has published.

Discussions at the meeting therefore focused in particular on the pace of monetary policy tightening. “A number” of members of the Board of Governors wanted to “keep the door open for a bigger hike” at the next meeting on July 20, according to the minutes of the exchanges between the officials.

These proponents of more proactive action against inflation – “the hawks” – pleaded for the Governing Council to “retain the discretionary power to adjust the extent of the movement in key rates” if the outlook for inflation medium term are deteriorating again between now and the July 20 meeting.

A compromise was finally found for the ECB to launch its rate hike cycle with a 25 basis point hike, “a first proportionate step”, because it is a “step that needs to be prepared and explained with care,” according to the minutes.

On reading these extracts, “the basic scenario of an increase in the key ECB rates of 25 basis points in July and an additional 50 basis points in September remains in place”, notes Carsten Brzeski, analyst at ING .

“However, with the risk of a looming Eurozone recession and a slowing US economy…some ‘hawks’ may still push for a 50bp rate hike in July. “, he continues. “The euro approaching parity against the US dollar could be another reason for the ‘hawks’ to push for surprise,” said the analyst.