The European Central Bank (ECB) announced last week that there were divisions in its Governing Council over the extent of the use of a new wave of bond purchase program. The majority of the Council, which is in charge of policy setting, nevertheless supported the anti-deflation tool as previous ones were insufficient. According to the minutes of the Council’s regular deliberations, most members had voted for an extension of the tool while some members had rejected the new measure saying 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”.
However, the minutes suggested that although “the existing monetary policy measures adopted in June and September 2014 were showing encouraging results with regard to a further improvement in overall financing conditions, it had become increasingly evident that they would fall short in quantitative terms”. The ECB said that there was a broad consensus that “the conditions were fully in place for taking additional monetary policy action”. The Council members did not agree whether QE should be used just yet but there was unanimity that the tool was actually legal under the ECB’s statutes.
It was the first time that the ECB published minutes of its closed-door talks in an attempt to make the thinking behind important monetary policy decisions more transparent. The Frankfurt-based ECB decided to follow the example of the Bank of England and US Federal Reserve (Fed), which regularly publish the minutes of their meetings. Yet, unlike the Fed, for instance, the ECB does not reveal how particular governors voted in a given policy decision. The bank does not want the governors to be put under political pressure in their home countries.
