The European Central Bank policymakers debated the possibility of scaling back the massive stimulus, given the stronger economy, as well as the trade-offs between various scenarios about the pace and duration of asset purchases, during the policy session in September.
"Members had a very preliminary exchange of views about the future monetary policy stance and the considerations that might guide a recalibration of instruments and the transmission channels through which they shape financial conditions and the outlook for price stability," the minutes, which the ECB calls "the accounts", of the September 6-7 Governing Council meeting said.
While there was broad agreement among policymakers that there was still the need for substantial monetary policy support to return inflation to 'below, but close to 2 percent', they were more confident that the price growth target would be achieved given the dissipation of deflationary risks and a stronger economy.
"A view was put forward that conditions were increasingly falling into place that would allow the intensity of monetary policy accommodation to be adapted and would provide an opportunity to scale back the Eurosystem's net asset purchases," the minutes said.
Policymakers expressed discomfort about the very prolonged period over which inflation had been – and was still expected to remain – distant from the Governing Council's aim.
"Members also discussed some general trade-offs inherent in various scenarios for the future recalibration of the APP and, in particular, the choice between the pace and the intended duration," the minutes said.
"Within the framework of the Governing Council's forward guidance, the benefits from a longer intended purchase horizon, combined with a greater reduction in the pace, were compared with those from a shorter period of purchases and larger monthly volumes."
Stressing that the forward guidance on interest rates was an integral part of the overall policy stance, ECB rate-setters pointed out that any change in the same should apply to the entire tool-kit.
"There was broad agreement that the bulk of the decisions, including the strategy for recalibrating the policy instruments, could be taken at the forthcoming monetary policy meeting in October, while the possibility that some technical decisions could be taken at a later stage could not be ruled out," the minutes said.
Rate-setters also expressed worry over the recent appreciation of the euro and the risk of the exchange rate overshooting. ECB Chief Economist Peter Praet said that the recent volatility in the exchange rate represented a source of uncertainty that required "close monitoring" with regard to its possible implications for the medium-term outlook for price stability.
Policymakers widely agreed to Praet's statement minus the word "close".
They also saw downside risks to the euro area wage outlook.
It is widely expected that the ECB Governing Council will start its debate on scaling down or extending its massive stimulus in the policy session due later this month.
Economists widely expect the bank to announce some decision on any future change to the stimulus this month, with any step likely to begin at the start of the next year after the existing round of asset purchases are over in December.
by RTT Staff Writer
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