ECB minutes reveal differences over QE tool

Published Thu, Feb 19, 2015 · 01:28 PM

[FRANKFURT] The European Central Bank revealed on Thursday that there were deep divisions on its policy-setting governing council over the use of its new anti-deflation tool.

In the minutes of the governing council's meeting on January 22, published for the first time by the ECB, the central bank said that "a large majority" had voted in favour of a new bond purchase programme.

But "some members" had rejected it, saying such a tool should only be used as a "last resort." At last month's meeting - the ECB's first of the year - president Mario Draghi had unveiled plans to embark on a policy of so-called "quantitative easing" or QE to boost the worryingly low level of inflation in the 19 countries that share the euro.

While there was unanimity that such a programme was actually legal under the ECB's statutes, there was disagreement on whether it should be used just yet, the minutes revealed, without identifying which participant said what.

"Some members" had argued that "purchases of sovereign bonds should remain a contingency instrument of monetary policy, to be used only as a last resort in the event of an extremely adverse scenario, such as a downward deflationary spiral," the minutes said.

"However, thus far there was no evidence of a serious risk of deflation, which clearly argued against mobilising the instrument of sovereign bond purchases at the current meeting," the minutes stated.

Under Mr Draghi's plans, the ECB will buy 60 billion euros of public and private sector bonds per month from March through September 2016.

But the head of the German central bank or Bundesbank, Jens Weidmann, has openly expressed his scepticism about such a programme.

Mr Weidmann argues that QE takes the pressure off eurozone governments to get their finances and economies in order.

The minutes of the meeting, however, revealed that such concerns were taken into account by the governing council.

"It was noted that monetary policy action, particularly in the area of sovereign bond purchases, could not be seen in isolation from the actions of other policy areas," the minutes said.

"Possible moral hazard implications for euro area governments could weaken their incentives for structural reforms and fiscal consolidation. Hence, there was broad agreement that the effectiveness of sovereign bond purchases would also depend on the appropriate action on the part of other policy-makers in the euro area," the ECB said.


BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to



Get the latest coverage and full access to all BT premium content.


Browse corporate subscription here