Some ECB Policy Makers Wanted Larger Rate Cut, More QE Purchases

  • Governing Council agreed QE pace could be reassessed later
  • A few members saw no need for further stimulus in December

Some European Central Bank policy makers argued in favor of making a deeper cut to the deposit rate and stepping up the monthly pace of bond-buying, an account of the Dec. 3 Governing Council meeting shows.

“Some members expressed a preference for a 20-basis-point cut in the deposit-facility rate at the current meeting, mainly with a view to strengthening the easing impact of this measure,” a summary of the policy meeting published on Thursday said. “The possibility was also raised of expanding the monthly volume of purchases.”

Faced with steady if moderate growth and stagnant prices, in December the ECB cut its deposit rate to minus 0.3 percent, extended its quantitative-easing program to at least March 2017 and pledged to reinvest the principal of the bonds it bought. While President Mario Draghi argued that this re-calibration of monetary stimulus was “adequate” to return inflation near its goal of just under 2 percent, the continued fall in oil prices since then may pose fresh challenges to his outlook. The next ECB policy meeting is scheduled for Jan. 21.

The account show that some Governing Council members called for no action, with a “few” speaking in favor of only cutting the deposit rate. At the same time, the decision to limit the rate cut to only 10 basis points was seen as “having the advantage of leaving some room for further downward adjustments, should the need arise.”

ECB policy makers expressed a broad agreement that a “reassessment could be made in the future” about the option of increasing monthly QE purchases beyond the current 60 billion euros ($66 billion) a month.

“Policy action was widely seen as warranted in order to re-calibrate the monetary-policy stance to support a return of inflation rates toward levels that were below, but close to, 2 percent and thereby anchor medium-term expectations,” the account said.

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