ECB Chief Economist Philip Lane said in a speech that the upcoming September monetary policy meeting will be the “start of a new phase” for the central bank. This new phase consists of a ” meeting-by-meeting (MBM) approach” to setting interest rates.
At a basic level, the transition from rate forward guidance to the MBM approach is in line with our monetary policy strategy, which assessed that forward guidance was primarily an appropriate response to the lower bound constraint,” he said. “As policy rates move away from the lower bound, the inherent flexibility of the MBM approach is better suited to calibrating monetary policy in a highly uncertain environment.”
Lane also explained that the MBM approach essentially has “two elements”, the terminal rate, and the speed to close the gap between prevailing interest rate and the assessed terminal rate.
