ECB debated smaller stimulus package: accounts

FRANKFURT: European Central Bank policymakers debated a smaller increase in emergency bond purchases last month and were keen to emphasize that they may not spend the full quota, the accounts of their Dec 10 meeting showed on Thursday.

Facing a new recession amid widespread lockdowns, the ECB approved fresh stimulus measures at the meeting, hoping to keep borrowing costs depressed until the bloc is ready to reopen.

"It was argued that the focus on preserving favourable financing conditions implied a move away from a constant monthly pace of purchases towards adjusting the pace according to market conditions," the ECB said.

"This approach, combined with forceful communication, could allow the Governing Council to reduce the pace of purchases while having an equivalent effect on financing conditions," policymakers said, according the accounts.

Restrictions on everyday life have grown increasingly onerous even in the past month challenging growth assumptions and raising the risk recovery would be even further delayed.

But ECB President Christine Lagarde this week argued that uncertainty is actually declining and even if the pandemic presents near term challenges, the overall outlook has not changed.

ECB policymakers began discussions ahead of the December meeting with a proposed 750 billion euros worth of additional bond purchases before settling for half a trillion euros on Thursday, sources told Reuters at the time.

"A more moderate increase in the PEPP envelope was advocated by a number of members based on the argument that significant space for purchases was still available from past decisions and that in an environment of high uncertainty it was worth 'keeping some powder dry'," the ECB added.

The ECB will next meet on Jan 21 and policymakers are expected to reaffirm the bank's ultra easy policy, including 1.85 trillion euros worth of bond purchases as part of the Pandemic Emergency Purchases Programme through March 2022.