Members of the European Central Banks governing council are supportive of a package of stimulus measures to increase inflation, according to the minutes from the July 24-25 meeting released Aug. 22.
The minutes showed the council — made up of governors from the euro area central banks and six members of the executive board — believed that it was important to "demonstrate its determination and capacity to act" by easing its policy stance further and using all of its instruments.
The bank's long term inflation target of 2% is proving illusive, with the growth in prices in the euro area slipping to 1% in July from 1.3% in June. The minutes appear to confirm the expectations of many ECB watchers who expect a major announcement in the September meeting, potentially including a restart of quantitative easing and a rate cut.
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"Experience had shown that a policy package — such as the combination of rate cuts and asset purchases — was more effective than a sequence of selective actions," the minutes said.
"Big ECB package is coming," tweeted Frederik Ducrozet, global macro strategist at Pictet Wealth Management, suggesting that the ECB recognized its need to counter doubts over its ability to revive inflation.
Ducrozet expects a €50 billion-per-month QE2 program and/or a 20-basis-point cut to the deposit rate.
Andrew Kenningham, chief Europe economist at Capital Economics, said the minutes reinforced his expectation of a 10-basis-point cut with more QE to be announced in October.
Draghi had already softened the bank's position in the July meeting by changing the forward guidance on interested rates to continue "at present or lower levels" through the first half of 2020.
The minutes show there was broad agreement among the council that the outlook for inflation and economic growth had worsened.
ECB Chief Economist Philip Lane said, "[T]he Governing Council needed to underscore its preparedness to act at its forthcoming meetings should the inflation outlook fail to improve." Lane recommended an adjusted forward guidance on rates "reintroducing an easing bias" and to begin preparations on policy options including a tiered system for reserve remuneration and "potential new asset purchases." This assessment was "broadly shared" by members.
"A package of easing measures at the ECB's September meeting looks almost a given," wrote Jan von Gerich, chief analyst at Nordea Bank, who expects a 10-basis-point cut in the deposit rate, €30 billion of net asset purchases to start in October and strengthened forward guidance.
The minutes came following some relatively positive economic news as the flash composite purchasing managers' index in Germany edged up to 51.8 from 51.5, but generally data has been weakening. The euro was trading down 0.1% against the dollar at $1.11 as of about 10:30 a.m. ET.

