RG: ECB extended stimulus as 'steady hand' in turbulent year
FRANKFURT, Germany (AP) â€” Top officials of the European Central Bank wanted to extend stimulus measures in December in part to protect the eurozone economy from what could be a turbulent political year at home and globally.
The concerns were recorded in a written account published Thursday about the bank's Dec. 8 meeting. That's when it decided to extend its bond-buying stimulus program by nine months until the end of this year, though reducing monthly purchases to 60 billion euros ($63 billion), from 80 billion euros.
The bank's governing council thought more stimulus would provide a "steady hand" to support the economy of the 19 countries that share the euro against "shocks emanating from the political environment at the global level and within the euro area."
Elections in the Netherlands, France and possibly Italy will give populist, anti-EU and anti-euro forces a chance to test their strength with voters. Britain is expected to start talks on leaving the European Union, which could lead to new restrictions in doing business with a major eurozone trading partner. U.K. voters chose to leave in a referendum last June. The election of Donald Trump as U.S. president has also raised uncertainty about U.S. trade policy and fed expectations that anti-establishment politicians in Europe may also do better than many expected.
The 25-member council also felt there was no convincing upturn in underlying inflation toward the bank's goal of just under 2 percent. The bond purchases inject newly printed money into the financial system, a step that aims to increase inflation as well as lending and business expansion.
The overall inflation rate has picked up noticeably since the meeting, to 1.1 percent annually. And economic data has been relatively upbeat in recent weeks â€” on Thursday, official figures showed industrial production in the eurozone spiked 1.5 percent in November from the month before.
However, so-called core inflation â€” excluding volatile fuel and food prices â€” has remained stuck.
The written account â€” which omits names and vote tallies â€” said that "a few members" opposed the stimulus extension based on their "well-known general skepticism" about extraordinary stimulus involving printing new money. Those members viewed money-printing stimulus through bond purchases as a step to be reserved for times of grave crisis. But stimulus skeptics appear to remain a minority on the council.
The council is made up of six top officials at the bank's headquarters in Frankfurt, led by President Mario Draghi, plus the heads of the 19 national central banks in the countries belonging to the currency union.