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[FRANKFURT] The European Central Bank wants to signal its readiness to roll out new stimulus measures, while stressing that it is no done deal it will actually do so next month, according to the minutes of its last meeting in January, released on Thursday.
In order to avoid a repetition of the financial market volatility in December when new policy moves were seen as falling short of expectations - which the ECB itself had helped fuel - the bank's governing council agreed that "emphasis needed to be placed on appropriate communication," the minutes showed.
"The governing council needed to strike a balance between signalling clearly its full capacity, willingness and determination to act and, at the same time, not implying that policy action had already been decided when the economic environment remained very fluid," they said.
The ECB has come under fire for the perceived timidity of stimulus moves in December, when it modestly pared back one of its key interest rates and extended its controversial QE bond purchase programme by just six months.
In the run-up to that meeting, investors had bet heavily on more aggressive policy action, speculation which top ECB members had themselves helped fuel.
Ahead of its next meeting on March 10, the governing council is concerned that a similar situation could arise again after ECB chief Mario Draghi has repeatedly stated that the bank would re-assess and review its current monetary policy stance next month.
But a number of officials have taken pains to insist that additional action was not a foregone conclusion and would depend critically on the ECB's latest economic projections, to be published at the meeting.
According to the minutes of the governing council's most recent meeting on January 20 and 21, members felt "it had to be avoided, by means of appropriate communication, that markets developed undue or excessive expectations about future policy action, bearing in mind the market volatility experienced around the December 2015 monetary policy meeting." The ECB's monetary policy "should be predictable but - while conveying that the governing council was active and alert - should not be seen as being pre-committed or geared to fulfilling prevailing undue market expectations," the minutes stated.
The ECB has rolled out a series of measures since mid-2014 to try and drive stubbornly low eurozone inflation back up to levels more conducive to economic growth.
But area-wide inflation stood at just 0.4 per cent in January, a long way off the central bank's target of just under 2.0 per cent.
According to the minutes, the governing council "needed to reiterate that monetary policy was firmly committed to achieving" that target.
And it should also emphasise the effectiveness of the instruments that had been activated so far "and recall that a substantial degree of accommodation was still in the pipeline, which would take time to fully unfold and pass through to the euro area economy," the minutes showed.
Discussions by council members "underlined that the ECB's monetary policy was data driven and that further analysis and information had to be gathered for a comprehensive review of the monetary policy stance at the next monetary policy meeting," the minutes stated.