ECB Account Shows Officials Prepared to Alter Stimulus If Needed

ECB: Early Recovery Phase, High Uncertainty

The European Central Bank may alter the pace of its unprecedented bond-buying plan if necessary, an official account of the institution’s last policy meeting shows.

While Governing Council members currently deem the scope of their quantitative-easing program appropriate, this assessment may change over time as the latest economic projections are surrounded by higher-than-usual uncertainty, according to deliberations by the 25-member group published in Frankfurt on Thursday.

“There were various reasons for caution with respect to the materialization of the March ECB staff projection baseline and to the expected time frame for the non-standard measures, particularly toward the end of the horizon,” the text of the account says. The ECB “would continuously assess the effectiveness of the measures and would regularly review progress toward the attainment of the objectives.”

The accounts provide details of the meeting in Nicosia on March 4 and 5, where policy makers agreed on modalities of their 1.1 trillion euro ($1.2 trillion) bond-buying program and revealed new economic forecasts. The ECB predicted consumer prices would remain unchanged this year before accelerating gradually to 1.8 percent in 2017. Gross domestic product was projected to expand 1.9 percent in 2016 and 2.1 percent in 2017, according to the staff forecasts.

“Some caution was expressed concerning the degree to which the pick-up in inflation rates could be expected to be maintained in 2017 and beyond the projection horizon,” policy makers concluded in the accounts.

Sustained Adjustment

President Mario Draghi has said that even as the euro region’s economy is starting to improve, the ECB is determined to conduct monthly asset purchases of 60 billion euros until there’s a “sustained adjustment in the path of inflation” toward the central bank’s goal of just below 2 percent.

Unlike the Federal Reserve Bank, the Bank of England and the Bank of Japan, the ECB doesn’t publish the votes of individual policy makers and uses qualifiers such as “broadly agreed” and “widely shared” instead. The Frankfurt-based institution also continues to keep the full minutes of all discussions secret for 30 years.

While the ECB “decided that we needed to be more open with the public about how we reached our decisions,” officials should be insulated from “national scrutiny,” Draghi said in a speech in Frankfurt on March 31. “The explanation for non-attribution lies in the specific institutional setting of the euro area and the unique communication challenges in a multi-country monetary union.”

Together with the decision to publish accounts, the ECB also changed the interval of its monetary-policy gatherings from monthly to every six weeks. Officials will meet for their next interest-rate decision on April 15 in Frankfurt.

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