ECB Preparing New Long Term Loans For Banks: Minutes
February 21 2019 - 4:49AM
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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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