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ECB’s Meeting Minutes Shows Officials in No Hurry to Scale Back Stimulus

The European Central Bank published the monetary policy accounts of the January 19th meeting. Reports showed that policy makers wanted to keep the pace of stimulus purchases unchanged and did not show any intention of scaling back the central bank’s QE purchases. The meeting minutes was in fact in stark contrast to the December meeting where some members expressed concerns on the loose monetary policy.

Many members agreed that the pick-up in inflation was only temporary and that there were still risks to the recovery in the region, leaving policymakers to agree that the ECB should keep policy steady. Some members even left the option open to increasing more stimulus if growth showed any signs of weakening.

“The Governing Council was seen as well advised to remain patient and maintain a ‘steady hand’ to provide stability and predictability in an environment still characterized by a high level of uncertainty,” the ECB’s meeting minutes said.

There was some flurry of activity initially after inflation started to rise strongly since December 2016. This prompted officials from Germany to openly criticize the ECB and called for scaling back of the QE program. However, latest figures showed that inflation gains came mostly on account of higher oil prices, which ECB officials view as being transitory and not the kind of inflation they expect to kindle. Following the strong rise in the headline inflation, core inflation has remained flat at 0.9%, prompting ECB officials to quickly point this out.

The central bank has purchased over 1.5 trillion euro worth of sovereign bonds since it launched the QE program two years ago and is expected to continue its bond purchases until the end of this year, albeit at a smaller pace starting March 2016.

ECB expected to remain on the sidelines for now

The central bank is expected to remain on the sidelines for the most part of this year with Netherland, Germany and France lined up for elections this year. Among the three, the outcome of the elections from Germany and France will be crucial for the future of the euro and the European Union.

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Tuesday, 21 Feb, 2017 / 8:39

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