Minutes of the European Central Bank Meeting: Implementing restrictive monetary policy is safe.

European Central Bank officials said in the minutes of the January meeting that they still had confidence in describing the current monetary policy stance as restrictive. The summary of the meeting released on Thursday showed, "It is generally believed that even with the current deposit facility rate, the monetary policy can still be assessed as restrictive safely." The market widely expects the ECB to further cut the key deposit rate next week, from 2.75% to 2.5%, bringing the total easing since June last year to 150 basis points. However, there is increasing controversy over the future policy direction. Some policymakers are still concerned about stubborn inflation in the services sector, rising energy prices, and the impact of US trade tariffs, while others are more focused on weak economic growth and the risk of failing to achieve the 2% inflation target. In addition, there are disagreements among officials about the restrictiveness of the current monetary policy. Here are other key comments from the ECB meeting minutes on January 29-30: About interest rates "The Governing Council believes that it is premature to discuss the potential target range for the key rate as inflation continues to converge towards the target." "The incremental decision-making process guided by the three major criteria framework works well for the Governing Council, and members are satisfied with the way markets interpret the ECB's response mechanism." "Given the current uncertainty, some views suggest that when the policy rate is nearing the neutral range, caution should be exercised in the magnitude and pace of further rate cuts." About neutral interest rates Public discussions on neutral interest rates and their relationship to terminal rates are considered misleading. "The meeting reviewed the high uncertainty about the level of the natural interest rate or neutral interest rate. While the natural interest rate can theoretically act as a long-term reference point for evaluating the monetary policy stance, it is an unobservable variable, and its actual utility in the incremental policy-making in successive meetings is questionable." "The Governing Council has no choice but to determine the policy rate path that is consistent with the medium-term targets through successive meetings." "A higher neutral interest rate suggests that if the policy rate is further cut at this meeting, the rate may be close to the neutral range. This indicates that the monetary policy may no longer be classified as restrictive, and the critical point is approaching." About inflation "Members unanimously agreed that the inflation convergence process is progressing smoothly, but the growth prospects remain weak." "Despite the target not being achieved yet, and short-term inflation expectations are expected to remain above the target, with overall inflation and core inflation recently below the ECB's predictions, confidence in inflation timely and continuously converging towards the target has increased." "The meeting emphasized the need to remain cautious due to high uncertainty, persistent upward risks in energy and food prices, robust labor market and high agreed wage growth, and stubborn inflation in the services sector." "There is evidence that since December, the balance of risks for inflation has tilted upwards, for example, market surveys show that the risks of inflation overshooting are greater than the risks of lower expectations." About the economy "The risks to the economic growth prospects still tend towards downside, which typically also means long-term inflation faces downside risks." "The outlook for economic activity is affected by geopolitical tensions, concerns about eurozone fiscal policy, and uncertainty related to potential trade frictions that the US government may adopt in the future that could lead to a global economic slowdown." "As long as the inflation convergence process remains on track, policy rates can further converge towards neutral levels to avoid unnecessarily dampening economic growth."