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Reviewing the European Central Bank’s (ECB) September meeting accounts that was published on Thursday, “When discussing the monetary policy stance and policy considerations the Account reveals that all members of the Governing Council agreed that a further easing of the monetary policy stance was warranted, but that the views on the various elements of the policy package differed,” noted ABN AMRO economists  Nick Kounis and  Aline Schuiling.

Key quotes

“In fact, ‘a number of reservations were expressed about the individual elements of the proposed policy package’. Most importantly, a ‘clear majority’ of members agreed with the restarting of net asset purchases, but ‘a number’ of members assessed the case for renewed purchases as not sufficiently strong and considered a package not including net purchases to be adequate. What is more, ‘a very large majority’ of members agreed to cut the deposit rate by 10bp to -0.5%, while a ‘few members’ were considering a 20bp rate cut, ‘in particular as part of a package that would exclude net asset purchases’.”

“Looking forward, we think the ECB will need to ease policy further given that we are more pessimistic than the central bank on the outlook for GDP growth and inflation. Indeed, incoming data since the September Governing Council meeting have signalled that the slowdown in the global economy will be more protracted, which will also weigh on the eurozone economy (see here).”

“We expect an additional 10bp reduction of the deposit rate in December, while the pace of net asset purchases could well be stepped up. Having said that, the Account suggests that the hurdle for additional rate cuts is lower than that for raising the monthly amount of asset purchases.”