ECB Toyed With Changing Forward Guidance in July -- Update

By Todd Buell Features Dow Jones Newswires

The European Central Bank's Governing Council toyed with making a slight change to its forward guidance last month, but decided not to out of caution, the account of its July policy meeting showed Thursday.

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"A suggestion was made that some consideration be given to an incremental adjustment in the language on forward guidance," the minutes said.

This was based on the notion that waiting too long to tweak guidance could create a "misalignment" between the ECB's communication and its assessment of the economy, which could bring about increased market volatility when the communication eventually changed.

The Council ultimately rejected this idea as, "it was generally judged paramount at this stage to avoid sending signals that could be prone to over-interpretation and might prove premature."

"Accordingly there was agreement among all members to retain all elements of forward guidance," the minutes said.

The minutes painted the picture of a central bank that doesn't want to pull the plug too soon on its aggressive stimulus, especially as inflation isn't yet at its target of just below 2% in the medium term.

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"The case was made for proceeding gradually and prudently when approaching adjustments in the monetary policy stance and communication, in line with the Governing Council's evolving assessment," the minutes said.

Write to Todd Buell at todd.buell@wsj.com

(END) Dow Jones Newswires

August 17, 2017 08:01 ET (12:01 GMT)