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ECB Minutes Suggest Policy Communication Script May Be Revised Soon


The European Central Bank could change the tone of its monetary policy communication early this year to reflect the improvement in growth prospects, minutes of the latest policy session showed on Thursday.

"Looking ahead, the view was widely shared among members that the Governing Council's communication would need to evolve gradually, without a change in sequencing, if the economy continued to expand and inflation converged further towards the Governing Council's aim," the central bank said in the summary, which it calls "account", of the December 13-14 policy session.

"The language pertaining to various dimensions of the monetary policy stance and forward guidance could be revisited early in the coming year."

The euro surged following the release of the minutes as a change in the tone of the policy communication suggested that the bank was planning to step up its efforts to wind down the massive stimulus.

The ECB left its key interest rates, asset purchase plan and forward guidance unchanged in the December meeting.

The minutes showed that the bank expects the forward guidance to gain prominence, going forward.

"As progress was made towards a sustained adjustment in the path of inflation, the relative importance of the forward guidance on policy rates would increase," policymakers agreed to ECB Chief Economist Peter Praet's view, the minutes showed.

Policymakers also agreed that the Governing Council's forward guidance framework would evolve naturally, in line with the established sequencing between the APP and interest rate guidance. They want the policy communication to be adjusted gradually over time to avoid sudden and unwarranted movements in financial conditions.

ECB rate-setters also stressed that it was important to reflect on "how to transition gradually from the present conditionality focused on asset purchase programme net purchases to a broader concept of forward guidance comprising various dimensions of the monetary policy stance."

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