FRANKFURT: European Central Bank rate setters agreed in April that they need to defend the bank against a growing number of critics, as its ultra-easy policy came under fire in Germany and elsewhere, minutes of their meeting showed on Thursday.
German banks and savers have complained the ECB's ultra-low interest rates and money-printing were hitting their profits. Finance Minister Wolfgang Schaeuble even argued they were partly to blame for the rise of the right-wing anti-immigration party, Alternative for Germany (AfD).
Investor confidence in the ECB has also been waning. Market-based measures of inflation expectations remain near the low level they had reached when the ECB began its asset purchases in January 2015, despite repeated ECB moves to boost the programme.
ECB Governing Council members emphasised the need to react to such scepticism and reaffirmed their confidence about the success of their programme in bringing inflation back to the ECB's target of almost 2 percent "in the medium term".
"There was general agreement that there was a need to counter the perception that monetary policy could no longer contribute to a return of inflation (to the ECB's target)," the ECB said.
"In light of recent public criticism ... in a Member State, it was viewed as important to reaffirm collectively the independence of the ECB in the pursuit of its mandate."
Since then, several ECB policy makers, including President Mario Draghi and the head of the Bundesbank, Jens Weidmann, defended the bank's policy in the German press, saying it was a reaction to rather than a cause of weak economic growth.
The record of the April meeting suggests the rate setters were more optimistic about the economy but remained concerned that low oil prices might undermine wages and other prices. They noted financial markets were not signalling faster inflation even after oil prices rebounded.
"It was considered worrisome that, despite the stabilisation in oil prices, market-based inflation expectations had not picked up from their low levels," the minutes said.
While reiterating they were willing to do more to boost inflation, the ECB rate setters said they would now focus on rolling out the measures announced in March.
They also said the ECB does not "mechanically" react to changes in its three-year staff inflation forecast and takes a more flexible approach when assessing the "medium-term" outlook.
"In particular, the medium-term horizon should not be equated to the horizon of the staff projections, as outside observers sometimes appeared to do when characterising the Governing Council's reaction function," the ECB said.
"In this regard, great care was needed when framing the Governing Council's reaction function, also in the context of forward guidance, to avoid conveying the sense that monetary policy was mechanically focused on a specific time horizon."
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