The minutes of the ECB Governing Council Meeting held on December 12-13 2018 were released today, with a number of the main points highlighted below.
- The ECB council argued for risk assessment on economic activity in light of recent economic decline.
- The risk situation was described as “fragile and fluid,” pointing to volatility and somewhat contradictory data releases over the last few months which, along with factors such as Brexit and the US-Chine trade war, have led to an uncertain environment.
- The decline in oil prices is another factor deemed likely to prompt financial stimulus measures being put in place such as making cheap loans to banks available to promote economic growth.
European Central Bank policymakers are considering making cheap, multi-year loans available to banks once again over the next few months as part of a wider easing scheme designed to alleviate downward pressure on the Eurozone economy.
The meeting marked the end of the ECB’s $3 trillion bond buying scheme with ECB president Mario Draghi citing growing risks and weaker-than-expected data as the reasons for halting the scheme.
Meeting minutes point to some policymakers wanting even more cautious measures from the central bank president with some of them calling for discussion on opening a new line of cheap credit to banks in order to stimulate funding for lenders in Portugal, Spain, and Italy among other member states.
This fell in line with external market expectations and points to a potential Targeted Long-Term Financing Operation being put in place in the coming months, unleashing a powerful stimulus tool at the central bank’s disposal.
Rate settlers have called for the ECB to specifically use the term “tilted to the downside” when describing risks to the eurozone region’s economic growth, as this phrase has signalled softer monetary policy in the past. For now, the ECB has comprised in saying risks are balanced but “moving to the downside.”
#ECB minutes says euro economy outlook "fragile and fluid", case was made for assessing risks as tilted to the downside and a suggestion was made to revisit TLTROs as contribution to monetary policy.... doesn't look like a central bank about to pull the trigger on interest rates
— Mike Dolan (@reutersMikeD) January 10, 2019
“Looking ahead, the suggestion was made to revisit the contribution of targeted longer-term refinancing operations to the monetary policy stance,” the ECB said when summarizing the December meeting.
“It was underlined that the situation remained fragile and fluid, as risks could quickly regain prominence or new uncertainties could emerge.”
The gold market has seen little reaction to the release of the ECB minutes, with spot gold trading at the low end of the session range but still up 0.07%, last trading at $1,290.17/oz with a high of $1,297.10/oz and a low of $1,290.13/oz.
While somewhat ambiguous, the meetings are being viewed by many as an indication that the ECB will not be heavy-handed with rate hikes this year.