ECB Split on Stimulus Guidance as Policy Makers Consider Drafts

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European Central Bank policy makers are split over changes to their language on monetary stimulus in draft documents being circulated before next week’s Governing Council meeting, according to officials familiar with the matter.

The ECB will adjust its guidance on key tools including interest rates on July 22 after it concluded a strategy review this month. That review raised its inflation goal and included a pledge to be especially forceful or persistent in providing support when interest rates are close to their lower limit, as they are now.

While the Governing Council unanimously signed off on the language in the review, and also agrees that any premature tightening of policy must be avoided, its more-hawkish and more-dovish members are some distance apart on how to reflect the new strategy in current policy. The discussions are becoming intense and heated, the officials said.

The policy statement will take account of a change in the ECB’s inflation goal to 2% from “below, but close to, 2%” but President Christine Lagarde has suggested that more will be needed. She told Bloomberg Television that “given the persistence that we need to demonstrate to deliver on our commitment, forward guidance will certainly be revisited.”

Economists have speculated the ECB might toughen its pledge on how long it’ll push on with record-low interest rates and asset purchases, such as promising to keep going until inflation is visibly in line with the goal, even if it overshoots for a while.

Another looming battle -- how to phase out emergency bond-buying and adapt an older asset-purchase program -- won’t be decided until September, the officials said.

An ECB spokesman declined to comment.

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