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ECB raises concerns over recovery from 'soft patch,' muted inflation

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ECB raises concerns over recovery from 'soft patch,' muted inflation

Members of the European Central Bank raised concerns over the eurozone's ability to return to solid growth rates amid a slew of disappointing macro data, saying inflation has remained "uncomfortably" below its target, minutes from the bank's April 9-10 meeting showed.

"[M]embers widely shared the view that the more protracted 'soft patch' suggested by the latest data remained consistent with the baseline scenario of a return to more solid growth in the second half of the current year," according to the account of the meeting.

"At the same time, it was acknowledged that there was now somewhat less confidence in this baseline scenario and that the range of other possible outcomes had widened."

Flash estimates from Eurostat showed that the eurozone economy expanded by 1.2% year over year in the first quarter, slightly above the ECB's revised full-year outlook for the single-currency area.

Growth in the manufacturing sector remained a concern, with the purchasing managers' index staying in negative territory for three months in a row.

The ECB also expressed concerns over soft inflation data, with members saying the transmission of wage inflation to consumer price inflation remained a key issue for its medium-term outlook.

Meanwhile, policymakers said they will outline the details of the third batch of targeted longer-term refinancing operations at upcoming meetings.

Some members were in favor of pricing the new operations so that they serve as a backstop for banks in case of heightened uncertainties. Other policymakers said the targeted longer-term refinancing operations should be seen as a potential tool for adjusting the monetary policy stance.