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ECB Preparing New Long Term Loans For Banks: Minutes


European Central Bank policymakers acknowledged that the uncertainty surrounding the euro area growth and inflation outlook has risen recently, thus raising the need for significant stimulus, possibly in the form of a new batch of longer term loans for banks to boost lending to the real economy, minutes of the January 23-24 policy session showed on Thursday.

"There was wide agreement that the continued convergence of inflation to the Governing Council's aim in the period ahead still required an ample degree of monetary accommodation," the ECB said in the minutes, which it calls "account of the monetary policy meeting".

In January, the bank left its key interest rates and forward guidance unchanged. In December, the bank ended its four-year long massive asset purchase scheme of EUR 2.6 trillion.

Policymakers agreed that the risks to the euro area outlook had moved to the downside on account of the persistence of uncertainties related to geopolitical factors and the threat of protectionism, vulnerabilities in emerging markets and financial market volatility.

Recent data and survey outcomes have continued to be weaker than expected, but policymakers saw the need for more information for a thorough assessment of the implications of weaker growth for the medium term inflation outlook.

"Looking ahead, a key question was seen to be the extent to which the weaker growth momentum might turn out to be more persistent than currently envisaged," the minutes said.

"More information, including the March projections, was needed to deepen the analysis and obtain greater clarity before conclusions could be drawn about the medium-term inflation outlook."

While considering the available policy options, the Governing Council discussed the re-launch of cheaper longer-term loans under the earlier scheme called Targeted Long-Term Refinancing Operations, or TLTRO.

"While any decisions in this respect should not be taken too hastily, the technical analyses required to prepare policy options for future liquidity operations needed to proceed swiftly," the minutes said.

Under the ECB's earlier tool named the targeted longer-term refinancing operations, or TLTRO, the ECB gives longer-term loans to financial institutions at attractive rates to boost lending in the real economy.

Previously, the ECB launched two rounds of TLTROs - the first in June 2014 and the second one in March 2016. The maturity period for those loans was four years.

The next ECB Governing Council policy session is on March 7. The latest set of ECB Staff macroeconomic projections would be unveiled in that session.

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