ECB Unanimous on Stimulus Need, But Yet to Agree on Extent

European Central Bank’s Governing Council differed on how much additional monetary stimulus was needed in last month’s meeting, according to Bloomberg. The council, nonetheless, agreed more aid was needed to preserve favorable financing conditions.

• Policymakers argued for smaller and larger increases in the pandemic bond-buying program and disputed the extent of loosening conditions on long-term loans for banks.
• The ECB council also voiced concerns over exchange rate risks that might negatively affect the inflation outlook.
• Some ECB Council members argued that the proposed increase in the pandemic purchasing envelope was insufficient to ease financing conditions.
• Other ECB Council members have expressed reservations on calls for higher allowance, saying it “would make banks dependent on the Eurosystem as their funding source.”
• The Governing Council ultimately agreed on a 500 billion-euro or $608 billion boost to the pandemic purchasing program, taking it to 1.85 trillion euros, but hawkish officials secured a caveat restricting the whole amount from being deployed.

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