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Risk of inflation target miss increased: ECB minutes
[FRANKFURT] The risk has increased that the European Central Bank would again miss its inflation target, the minutes of the bank's October meeting of policy setters showed on Thursday, adding that current measures may not be sufficient.
Though the ECB's accommodative measures are working, the bank was getting little outside help as government reform efforts were disappointing and the European Commission's investment programme, known as the Juncker Plan, lacked momentum, the bank said in the accounts of the Oct 22 meeting.
Highlighting the debate in its Governing Council, the bank said it would either have to acknowledge that it is unable to fulfil its objective or needed to take more forceful action, possibly with a broader set of tools.
The bank repeated its earlier stance that it was ready to act and would reexamine its policies at its Dec 3 meeting. "A ... update by the ECB staff of their September projections... suggested that there were downside risks to the September baseline scenario," the ECB said, referring to economic forecasts. "The anticipated timing of inflation normalising toward 2 per cent was likely to be pushed back again, as had already been the case in previous staff projections," the bank said.
Such a trend was potentially "worrisome", especially as the rebound in core inflation was also stalling and the pass-through of low commodity prices to core inflation was fast and pronounced. "The impact of external factors and heightened uncertainty raised the possibility that the ECB's measures ... might not be gaining sufficient traction ... to achieve their ultimate objective," the bank said.