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Account of the monetary policy meeting of the Governing Council of the European Central Bank held in Frankfurt am Main on Wednesday and Thursday, 26-27 July 2023
31 August 2023
1. Review of financial, economic and monetary developments and policy options
Financial market developments
Ms Schnabel noted that, since the Governing Council’s previous monetary policy meeting on 14-15 June 2023, the narrative in global financial markets had shifted from a “higher-for-longer” scenario for inflation to growing optimism on a disinflation scenario. The increasing divergence of economic data between the euro area and the United States and the elevated sensitivity of euro area asset prices, especially to US data surprises, made the interpretation of market data challenging and could cause rapid shifts in market narratives.
Following the previous monetary policy meeting, central bank communication, high UK inflation releases and strong US economic data had initially driven the euro short-term…