Draghi's Stimulus Push Said to Encounter Most Opposition on QE

Are Draghi's Moves Enough to Stimulate Europe's Economy?
  • Some policy makers advocated deeper cut to deposit rate
  • Plan for new long-term bank loans proved non-controversial

European Central Bank policy makers differed the most over plans to expand bond purchases, and dissent on lowering the deposit rate centered mainly on the size of the cut, according to officials familiar with the deliberations.

QuickTake Europe’s QE Quandary

A handful of the 25 Governing Council members were skeptical that bolstering quantitative easing and starting to purchase corporate bonds would help boost euro-area inflation, the officials said, asking not to be named as the meeting was private. While introducing new long-term loans to banks was not contentious, some policy makers argued for a steeper reduction of the deposit rate, the people said. An ECB spokesman declined to comment.

After the meeting in Frankfurt on Thursday, President Mario Draghi outlined a package of measures that he said proved the institution isn’t out of ammunition. The split among officials underscores divisions that have provided a persistent backdrop to ECB gatherings and suggests any resistance to further measures is unlikely to abate.

The euro dropped when the plan was first unveiled, before rebounding as some investors speculated there are few options left.

Majority Support

Draghi told a press conference that an “overwhelming majority” of the council supported the package.

The ECB will buy 80 billion euros ($90 billion) a month of debt through at least March 2017, up from 60 billion euros previously, and will offer long-term loans at potentially negative interest rates to banks that run as late as 2021. The deposit rate was cut by 10 basis points to minus 0.4 percent and the main refinancing rate was reduced to zero.

Introducing the loans, which are tied to bank credit provided to companies and households, was not controversial, one of the officials said. The full details of that program still need to be determined. Corporate bonds, whose criteria for QE have also yet to be hammered out, are likely to make up only a small portion of the purchases, two of the people said.

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