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Report: ECB to discuss dropping pledge to ramp up stimulus at June meeting


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Report: ECB to discuss dropping pledge to ramp up stimulus at June meeting

The ECB will discuss the possibility of dropping its pledges to keep rates at current or lower levels for an extended period and to ramp up stimulus if economic outlook worsens, Reuters reported May 30, citing "four sources with direct knowledge of the discussions."

Policymakers are said to be ready to acknowledge economic growth when they meet June 8. They are considering removing a reference to downside risks in the bank's post-meeting opening statement and adding a statement that risks are largely balanced.

However, rate setters are cautious that a major shift in its communication could trigger market turbulence.

The euro could gain further if the ECB drops the reference to further rate cuts, hurting exporters on the periphery and dampening inflation expectations, according to the report. Meanwhile, removing the reference to more bond purchases could raise yields, adding to the ECB's growing debt sustainability concerns.

A decision is unlikely to be reached at the June meeting, the sources said.

Eurozone requires an "extraordinary" amount of monetary policy support from the ECB, despite improving economic indicators as underlying inflation remains "subdued," ECB President Mario Draghi told lawmakers May 29.