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ECB Minutes Reveal 'Strong Call' For Unity Among Policymakers

ecbank sep13 21nov19 lt

The need for unity among Governing Council members was stressed during the final policy session chaired by Mario Draghi after the latest round of monetary stimulus measures led to a sharp divide in the rate-setting body, minutes of the October 23-24 meeting showed on Thursday.

"Looking ahead, a strong call was made for unity of the Governing Council," the minutes, which the ECB calls "account", showed.

"While it was underlined that open and frank discussions in the Governing Council were absolutely necessary and legitimate, it was regarded as important to form a consensus and to unite behind the Governing Council's commitment to pursuing its inflation aim."

Draghi stepped down as the ECB President on October 31 and was succeeded by France's Christine Lagarde, the former IMF Managing Director.

In the October session, the ECB left its key interest rates, forward guidance, and stimulus measures unchanged.

The main refinancing rate was retained at its record low 0 percent, and the deposit rate at -0.50 percent after a 10 basis points reduction in September.

The bank also retained its forward guidance on both interest rates and asset purchases.

In September, the ECB announced a restart of its asset purchase programme at a monthly pace of EUR 20 billion from November 1, among a host of other measures including the introduction of a two-tier system for reserve remuneration for banks.

The latest stimulus package failed to get the full backing of the Governing Council and the policy-making body had never seen such a major divide in views.

The euro area economy is facing a protracted weakness and subdued inflation and it was stressed that the September stimulus measures must fully implemented.

The minutes showed that the Governing Council was urged to remain prepared to act by deploying all its policy tools if the inflation outlook so required.

However, policymakers were cautioned that due consideration must be given to the possible side effects of monetary policy measures.

"At the same time, a plea was made for patience to allow the measures taken in September to work through the economy, supporting a "wait and see" posture at the current juncture," the minutes said.

Some policymakers also expressed concern regarding the possible spillover of the weakness in manufacturing and exports into the services sector.

"There were initial signs of some contagion from manufacturing to services, although it was too early to speak of more generalized spillovers," the minutes said.

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