Excerpts from the Account of the monetary policy meeting of the Governing Council of the European Central Bank, held in Malta on Thursday, 22 October 2015:
With regard to the monetary policy stance, members widely shared the assessment provided by Mr Praet in his introduction. The information that had become available since the Governing Council’s meeting in early September broadly confirmed the ongoing recovery. It also pointed to continued weak price pressures and suggested that the expected timing of a sustained normalisation of inflation could be pushed back further, which called for a thorough analysis of the factors that were currently slowing the return of inflation to levels below, but close to, 2% over the medium term.
Against this background, members voiced concern about the prospect of a further deterioration in the price outlook, including at the policy-relevant medium-term horizon, with risks clearly on the downside.
It was emphasised that, while the ECB’s asset purchase programmes and lending operations were working as intended in expanding liquidity, supporting favourable financing conditions and ultimately reaching output and prices, there had been a number of countervailing developments in external conditions. These included persistently low oil prices, weaknesses in emerging economies and the postponement of the expected adjustment in policy rates in the United States.
Taken together, the impact of external factors and heightened uncertainty raised the possibility that the ECB’s measures, despite their magnitude, might not be gaining sufficient traction in the present environment to achieve their ultimate objective in terms of inflation rates, also in view of low price pressures globally.
This suggested that the environment had not changed materially since the previous monetary policy meeting. It was therefore seen as preferable to wait until December to reassess whether there had been a sufficient change in the factors underlying the medium-term outlook for price stability. The renewed deterioration in inflation data had been largely due to commodity prices and external factors, as well as possibly to structural changes, outside the domain of monetary policy, while survey-based measures of longer-term inflation expectations remained well anchored. Moreover, there appeared to be no indications of a risk of deflation, in the sense of a self-reinforcing, expectations-driven, broad-based decrease in the price level.
Taking into account the views expressed by the Governing Council, the President concluded that the degree of monetary policy accommodation would need to be re-examined at the December monetary policy meeting. Accordingly, ECB staff and the relevant Eurosystem committees would be mandated to conduct a technical analysis of the monetary policy stimulus achieved, review the options available should the Governing Council judge that further monetary accommodation was necessary, and analyse them in terms of efficacy. It was underlined that the Governing Council was willing and able to act, if warranted, by using all available tools within its mandate, including by adjusting the size, composition and duration of the APP. It was recalled that the monthly asset purchases of €60 billion would be fully implemented until the end of September 2016, or beyond, if necessary, and, in any case, until a sustained adjustment was visible in the path of inflation that was consistent with the Governing Council’s aim of achieving inflation rates below, but close to, 2% over the medium term.