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Sunday 11 December 2016

ECB sticks with QE despite growth signs

Paul Carrel and Jonathan Gould

Published 03/04/2015 | 02:30

The ECB left its main interest rate at a record low just above zero at the off-base March meeting in Cyprus.
The ECB left its main interest rate at a record low just above zero at the off-base March meeting in Cyprus.

European Central Bank (ECB) policymakers agreed at their March meeting to "remain firm" in implementing a large-scale asset-purchase programme, even though the economic outlook shows signs of improving, records published yesterday showed.

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On March 5 the ECB said it would begin printing money to buy bonds - so-called quantitative easing (QE) - on the following Monday.

It also presented updated forecasts from its staff economists yesterday that gave a more rosy outlook, but policymakers agreed that did not reduce the need for QE.

"The March 2015 projections should... not be interpreted as suggesting that the latest monetary policy measures were less necessary," the accounts of the meeting read.

"Hence, it was essential for the Governing Council to remain firm, implementing the measures adopted without hesitation until the objectives were reached, in line with its commitment to keep this policy in place for as long as needed," the accounts read.

The ECB left its main interest rate at a record low just above zero at the off-base March meeting in Cyprus.

It also lifted its growth forecast for the Eurozone economy to 1.5pc for this year, from the 1pc it predicted in December.

ECB staff foresaw Eurozone inflation rising from 0pc this year to 1.8pc in 2017.

The minutes of the meeting give a bare-bones account of the discussion, but they do provide a glimpse of the pressure and tension involved in ECB decision-making, which seeks to forge consensus among 19 different countries from Germany to Greece.

Under its QE plan, the ECB aims to purchase €60bn a month of mainly sovereign bonds until September 2016, or beyond that if needed to see a sustained adjustment in the inflation path back towards its target of just under 2pc.

Meanwhile, German regional development bank L-Bank has filed a suit at the European Court of Justice seeking to escape direct supervision by the European Central Bank, L-Bank said on Thursday.

The ECB had placed the Landeskreditbank Baden- Wuerttemberg-Foederbank - which had assets of €70.7bn at the end of 2013 - on its list of 123 significant financial institutions that it started directly supervising in November.

L-Bank said while it supported the goals of the ECB's supervisory mechanism, L-Bank itself conducted only low risk development lending and not the international and complex banking activity that was the main target of ECB supervision.

L-Bank said the cost of ECB supervision will hurt its ability to provide low interest loans.

Irish Independent

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