The European Central Bank has turned more hawkish with several policymakers makers seeing the need for immediate steps towards policy normalization as euro area inflation set new highs on the back of soaring energy prices, minutes of the latest rate-setting session showed Thursday.
"A large number of members held the view that the current high level of inflation and its persistence called for immediate further steps towards monetary policy normalization," the minutes, which the ECB calls "account" of the Governing Council session held on March 9-10 showed.
There were also concerns that the latest staff projections may be underestimating the persistence of above-target inflation.
Eurozone inflation rocketed in March to set a new record of 7.5 percent as Russia's invasion of Ukraine drove energy prices higher. Core inflation, which excludes prices of energy, food, alcohol and tobacco, accelerated to 3.0 percent.
The argument that all three forward guidance conditions for an interest rate hike had either already been met or were very close to being met, was countered with the view that the persistence of the rise in indicators could be temporary and that uncertainty was high at the current juncture.
Further, policymakers considered it essential to take action at the present meeting on scaling back the scheduled purchases under the asset purchase program, or APP, over the following quarters to "unlock" optionality for future decisions on policy rates.
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