ECB Divided on Next Steps for QE

European Central Bank policy makers widely agreed at their January policy meeting that the risks for the eurozone’s $11 trillion economy have increased amid financial-market volatility and weakness in emerging markets, underlining the bank’s readiness to provide additional stimulus if needed in March.

But a summary of the meeting shows there were dissenting voices within the bank’s 25-member governing council, indicating there will be a lively debate over what action to take when it next meets on March 10.

ECB President Mario Draghi surprised investors last month by pledging to “review and possibly reconsider” the bank’s €1.5 trillion ($1.67 trillion) stimulus in March, just weeks after announcing a fresh package of measures that disappointed investors.

Most governing council members agreed that the risks for the economy had increased since the bank’s December meeting, according to the summary, mainly due to weakness in emerging economies and “renewed increases in financial and commodity market volatility.” The meeting predated the recent bout of market turbulence that has included sharp drops in European bank stocks.

Most council members thought inflation would fall below zero “for a number of months” as a result of low oil prices, far below the ECB’s target of just below 2%. They also thought ultralow consumer-price growth could start feeding through to wages and other prices, potentially sparking a deflationary spiral that the ECB has said it is eager to avoid.

via Nasdaq

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza