The European Central Bank policymakers agreed on the need to act amid weakening economic outlook but a number of reservations were expressed about the elements of policy package, the minutes of the September 11-12 Governing Council meeting showed Thursday.
ECB Chief Mario Draghi said all members agreed on the need to act in response to the continued shortfall of inflation and that a clear majority of members supported the proposed measures.
The Governing Council reiterated the need for a highly accommodative stance of monetary policy for a prolonged period of time and that it continued to stand ready to adjust all of its instruments, as appropriate.
However, there was disagreement on the size and instruments included in the stimulus package.
At the final policy session of Draghi as central bank chief, the council took a host of stimulus measures. The bank slashed the deposit rate by 10 basis points to -0.50 percent and decided to restart its asset purchase programme.
It was cautioned that the Governing Council should not try to accommodate market expectations but should base its decisions on its own assessment, the minutes revealed.
A few members expressed a readiness to consider lowering the rate on the deposit facility by 20 basis points at the meeting if the package excluded net asset purchases.
A number of members assessed the case for renewed net asset purchases as not sufficiently strong as they considered it as an instrument of last resort which should only be deployed in the event of more severe contingencies and which was not warranted in the light of the current outlook.
The minutes said concern was expressed that not delivering sufficient stimulus, including through the APP, might trigger a reversal of the current favorable financial conditions.
“A majority of members went along with the proposed introduction of a two-tier system for reserve remuneration as part of the overall policy package,” the minutes said.
A number of reservations were expressed about the monetary policy justification for a two-tier system. It was argued that, at the current juncture, monetary policy transmission channels seemed to be functioning well.
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