By Laurie Laird
— Some Governing Council members advocated a slowdown in bond buying, according to minutes of June meeting
LONDON (MaceNews) – Not all European Central Bank rate setters supported the most recent decision to accelerate asset purchases, with some advocating a slower pace of acquisitions as the eurozone economy outperforms expectations.
“In view of the better outlook for growth and inflation … it was argued that, to provide the same degree of accommodation, asset purchases should be scaled back somewhat,” according to minutes of the June Governing Council meeting released on Friday.
Following that meeting, the ECB reiterated its intention to conduct third quarter asset purchases at a ”significantly higher pace than during the first months of the year. “
However, “concerns were also expressed” that the “highly accommodative monetary policy” could “hinder” corporate restructuring and the reallocation of labour in a post-pandemic economy.
While members “generally agreed” to “reconfirm the very accommodative monetary policy stance,” at least one rate setter “remarked” that “even an increase in asset purchases as the main policy instrument could be justified at present.”
“Financing conditions were assessed at too fragile to allow a meaningful reduction in the pace” of asset purchases … and a “noticeable slowing” of the pandemic programme “would be inappropriate.” The minutes did not specify whether members were united in that assessment of market conditions.
The council retained its rather relaxed approach toward rising inflation, which hit an annual rate of 2.0% in May, before sliding back to 1.9% in June. Members “widely agreed on the importance of looking through the temporary increase in inflation in 2021,” as measures of inflation expectations “remain at subdued levels.”
The ECB announced a slight increase in its inflation target on Thursday, aiming for an annual rate of 2%, rather than the previous goal of close to but below 2%. Explaining that decision, ECB President Christine Lagarde also pledged to tolerate limited periods of above-target inflation.
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Contact this reporter: laurie@macenews.com.
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