Summary minutes of the meeting on April 3, 2008

The ECB Shadow Council decided with a majority of ten members to recommend that the ECB leave its key rate unchanged at four percent at the next policy meeting on April 10. Five members voted in favour of a rate cut of 25 basis points instead. This was down two from last month’s seven votes for a cut.

Agnès Bénassy-Quéré and Marie Diron joined those favoring unchanged rates. They explained that inflation risks had become more prominent over the last five weeks. Many members had expected inflation to peak early in the year and then to gradually decline. Instead, headline inflation reached a new high of 3.5 percent in March. Several members argued that there was now a substantial risk that the public’s inflation expectations could become unanchored.

The prevailing view was that the economy of the euro area has been holding up surprisingly well, so far. However, most members do expect a further slowdown, which would eventually dampen inflation pressures. Some members, arguing for a rate cut, fear that we are just at the very beginning of the slowdown. These members expect an economic slump brought about with some lag by the global slowdown and the soaring euro. Members revised up their average inflation expectation for this year from 2.6 to 2.7 percent. Growth expectations for next year were revised downward again significantly to 1.5 percent, after an unchanged 1.5 percent this year.

INDIVIDUAL VOTES (Recommended rate change in percentage points)
Member*	Affiliation	Vote
Josè Alzola	Citigroup, London	*)
Agnès Bénassy-Quéré	CEPII, Paris	no change
Willem Buiter	London School of Economics and Goldman Sachs	no change
Jacques Cailloux	Royal Bank of Scotland, London	no change
Julian Callow	Barclays Capital, London	no change
Giancarlo Corsetti	European University Institute, Florence	no change
Marie Diron	Ocford Economics	no change
Joachim Fels	Morgan Stanley, London	cut 25 bp
Daniel Gros	Center of European Policy Studies (CEPS), Brussels	no change
Stephen King	HSBC, London	cut 25 bp
Thomas Mayer	Deutsche Bank, London	cut 25 bp
Gernot Nerb	Ifo-Institute, Munich	*)
Thorsten Polleit	ECB-Observer, Frankfurt	no change
Véronique Riches-Flores	Société Générale, Paris	cut 25 bp
Jean-Michel Six	Standard & Poor's, London	cut 25 bp
Angel Ubide	Tudor Investment Corporation, Washington D.C.	no change
Charles Wyplosz	Graduate Institute of International Studies, Geneva	no change