Breaking News

ECB split over keeping bond buys open-ended: minutes

Economic IndicatorsNov 23, 2017 08:43AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. The headquarters of the European Central Bank (ECB) are photographed in front of the skyline with its banking towers in Frankfurt

By Balazs Koranyi

FRANKFURT (Reuters) - European Central Bank policymakers broadly agreed last month on extending their asset purchase scheme but a decision to keep the bond buys open-ended appeared to generate fiercer debate, minutes of the meeting released on Thursday showed.

Having to reconcile rapid economic growth with anemic inflation, the ECB opted last month to halve its asset purchases while extending them by nine months, hoping that gentler though longer stimulus would still keep growth strong enough to generate inflation.

But minutes of the debate at the Oct. 26 policy meeting suggest policymakers were far from unanimous, with some keen to signal a clear end to the ECB's lavish asset purchases and others arguing for a change in emphasis as a precursor to their eventual end. The euro zone's central bank already has over 2.2 trillion euros worth of assets on its balance sheet.

While the nine-month extension of the scheme at 30 billion euros per month enjoyed broad support, policymakers discussed a range of alternatives, debated an eventual change in the bank's guidance, and agreed that other components of central bank stimulus should also be highlighted, the minutes showed.

"An end date was viewed (by a few) to be well justified in anticipation of further progress towards a sustained adjustment in the path of inflation on the basis of the better than expected growth momentum, diminishing risks and continued favorable financing conditions for the real economy," the minutes said.

"Some concerns were also expressed that the open-ended nature of the asset purchase program might generate expectations of further extensions."

The dissenters argued that even if markets did not anticipate a clear end date, the reaction would be limited and in any case, the economy was able to handle tighter financing conditions given the solid growth path.

In a further sign of diverging views, some policymakers argued that the ECB should stop linking its asset buys to the path of inflation and should instead reference to its overall monetary policy stance.

Sources have previously told Reuters that policymakers were in general agreement that barring shocks, the asset buys would end next year.

In a possible preparation for this end, policymakers expressed a desire to highlight other parts of ECB support, particularly a sizable balance sheet, low rates and a promise to keep rates low for an extended period, the minutes showed.

The debate highlights the split in the Governing Council and suggests that any further extension of the asset purchase scheme would run into opposition, even if inflation will miss the ECB's target of almost 2 percent for years to come.

The ECB's problem is that while the euro zone economy has expanded for 18 consecutive quarters, its best run in a decade, inflation has undershot the bank's target for five years, threatening the ECB's credibility since inflation is its primary mandate.

But much of the bank's policy firepower is already exhausted after 2.2 trillion euros worth of bond buys so the ECB is under pressure to shift to lighter but more protracted stimulus, giving itself even more time to raise inflation.

Its biggest puzzle is that while unemployment is falling quickly, wages are not responding, throwing into doubt a long-standing relationship between the two indicators. Other regions, including the United States, are facing a similar dilemma.

ECB split over keeping bond buys open-ended: minutes

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email