ECB Policymakers Still See Need For Ample Stimulus: Minutes
European Central Bank policymakers continued to assess that there was a case for maintaining ample stimulus and stressed that measures that were put in place in December should be given time to take full effect, the minutes of the latest policy meeting showed Thursday.
“Members agreed that ample monetary stimulus remained essential to preserve favorable financing conditions over the pandemic period,” the minutes of the meeting, which the ECB calls ‘account’, said.
During the January 20-21 meeting, an argument was put forward that monetary policy should keep a steady hand. Rate-setters also agreed that that there was no room for complacency though there were signs of recovery gaining speed on roll-out of vaccinations against the coronavirus pandemic.
That said, it was argued that the fast rebound in growth foreseen in the December staff projections might be too optimistic, with Eurozone growth in the second quarter of 2021 possibly at risk from extended lockdowns.
The euro exchange rate remained a worry for policymakers, the minutes showed.
“Concerns were voiced…over developments in the exchange rate that might have negative implications for euro area financial conditions and, ultimately, consequences for the inflation outlook,” the minutes said.
The view that nominal yields were not an appropriate benchmark for assessing whether financing conditions remained favourable was reconfirmed. Nominal yields could rise because of a better economic outlook and higher inflation expectations, the bank noted.
Further, members agreed that not every increase in nominal yields should be interpreted as an unwarranted tightening of financing conditions and trigger a corresponding policy response.
“What mattered from a monetary policy perspective was the evolution of real rates, which had declined to record low levels in recent weeks,” the minutes said.
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