ECB’s Asmussen stresses importance of publishing minutes that could help or hinder forward guidance policy
The European Central Bank's (ECB) Jorg Asmussen has that the central bank is ready to act if conditions deterioriate, but that it is too early for an exit from accomodative monetary policy.
Asmussen said that forward guidance is intended to reduce market volatility and overreactions. That makes sense, as it's essentially a promise by central bankers to keep rates low, so traders shouldn't analyse hints of hikes to come – they've already been told they're not happening.
To ensure forward guidance works, those promises have to be credible. Leading on from that, Asmussen talked about publishing the minutes of ECB decisions.
While Asmussen said that publishing the who, what, and why of ECB votes would sharpen the ECB's mandate and be part of "richer communication", it'll be important to see some agreement among voters if forward guidance promises are to be kept seriously.
In the UK, rate hikes are being priced in before the three year horizon at which the Bank of England is likely to meet its seven per cent unemployment threshold.
With Monetary Policy Committee minutes revealing that members like Weale are rebelling already, people just don't trust that the central bank will keep rates low as it claims while the economy picture continues to improve.