ECB feared 'significant spillovers' from UK vote
European Central Bank policy makers estimated in June that the recovery in the 19-nation euro area would proceed at a "moderate but steady pace", though subject to "difficult to anticipate" risks from the UK's vote on leaving the EU.
Policy makers were in "general agreement" that the referendum "was an important source of uncertainty as regards the economic outlook".
In the event that the UK voted to go there could be significant "negative spillovers to the euro area via a number of channels, including trade and the financial markets", according to an account of the June 2 Governing Council meeting published yesterday.
Officials also acknowledged the concerns that its asset-purchase programme could face implementation challenges over time - meaning European countries and companies may not be borrowing enough on the markets to keep up with the ECB's appetite for buy bonds.
The accounts noted that "a remark was made that markets appeared to foresee future challenges in sourcing sufficient volumes of public bonds for some jurisdictions under present limits, which could contribute to increased price volatility".
At the same time policy makers said that with purchases could be made "via close substitutes across markets" and if they were indeed close substitutes "it should not matter much which precise assets were being purchased under the APP, but rather the overall purchase volume and associated money creation".
Stimulus measures including a bank-lending programme and corporate bond purchases announced in March may not have been fully integrated into June staff forecasts for growth and inflation, policy makers noted.
Those projections estimated that inflation will rise to average 1.6pc by 2018, short of the target of just under 2pc.
"Additional stimulus was expected from the measures still to be implemented, beyond the impetus already taken into account," the officials agreed.
"Both TLTRO II and the CSPP were seen as important measures that could be expected to impact the real economy directly." (Bloomberg)