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ECB worries about Greece as source of market volatility
[FRANKFURT] The European Central Bank worries about the wrangling over a debt deal with crisis-hit Greece as a source of financial market volatility, said minutes of a past meeting released on Thursday.
At the same time, the ECB's governing council believes its contested bond purchase programme is bearing fruit, although it was too early to declare it a success just yet.
"Prevailing geopolitical risks and continued uncertainty about the outcome of negotiations between one euro area government and its official creditors were also seen as likely sources of market uncertainty and volatility," according to the minutes of the ECB governing council's meeting on June 2-3 released on Thursday.
Nevertheless, "there was broad agreement among members that the monetary accommodation provided by all the ECB's monetary policy measures was bearing fruit," the minutes revealed.
The effects of those measures were "gradually working their way through to the economy, thereby contributing to the recovery, the pick-up in inflation and improvements in money and credit growth," the minutes said.
"The view was widely shared that it was, nonetheless, too early to declare them a success," they continued.
In March, the ECB embarked on a programme of so-called quantitative easing or QE, a massive 1.14-trillion-euro sovereign bond purchase scheme aimed at bringing inflation across the eurozone back up to levels consistent with healthy economic growth.
Under the QE programme, the ECB aims to buy 60 billion euros of bonds per month until September 2016.
Just three months in, top ECB officials are convinced that the purchases are having the desired effect and inflation rates in countries such as Germany and France are gradually moving upwards.
Nevertheless, QE has its critics, not least the head of the German central bank or Bundesbank, Jens Weidmann, who fear it will lessen pressure on governments to get their economies and finances in order.
And given its early success, there is some speculation that the programme's opponents on the ECB governing council could argue for an early roll-back as the eurozone recovery picks up speed.
But the success of the QE programme depended on it being implemented fully and it was too early to consider "tapering" the purchases just yet, the governing council agreed.
The purchases "were only in the third month," the minutes noted.
"Moreover, the economic recovery remained moderate and it still faced headwinds and remained subject to risks and vulnerabilities.
"Against this background, members widely agreed that it was essential to maintain a steady course of monetary policy, looking through short-term economic and financial market developments," the minutes said.
"This included leaving the key ECB interest rates unchanged in line with the governing council's forward guidance and firmly implementing the non-standard monetary policy measures adopted," the governing council concluded.