ECB sees no need to taper QE, minutes show

The European Central Bank revealed Thursday that its governing council believes its contested bond purchase programme is working and there is no talk of scaling it back just yet.

"Members generally agreed that a steady hand and the firm implementation of the measures decided in January 2015 would best serve to support the economic recovery and a return of inflation towards 2.0 percent," according to the minutes of the governing council's meeting on April 14 and 15 released on Thursday.

"There was hence no need to consider any change in the monetary policy stance at present", or to reconsider any of the parameters of the purchase programme, the minutes stated.

The ECB announced in January that it would embark on a programme of so-called quantitative easing or QE, a massive 1.14-trillion-euro ($1.3-trillion) sovereign bond purchase scheme aimed at bringing area-wide inflation back up to levels consistent with healthy economic growth.

Under the QE programme, the ECB aims to buy 60 billion euros of bonds per month until September 2016.

The ECB actually launched the programme in March and its top officials are convinced that the purchases are having the desired effect and inflation rates in countries such as Germany and France are gradually moving upwards.

Nevertheless, QE has its critics, not least the head of the German central bank or Bundesbank, Jens Weidmann, who fear it will lessen pressure on governments to get their economies and finances in order.

And given its early success, there is some speculation that the programme's opponents on the ECB governing council could argue for an early roll-back as the eurozone recovery picks up speed.

- Caution required -

But according to the minutes of the April 14-15 meeting, this is not the case.

"While there was a case for guarded optimism on the short to medium-term outlook for the euro area economy, taking into account initial evidence that the monetary policy measures were proving effective, it was important to remain cautious," the minutes said.

The governing council pointed out that it was only one month into the programme "and that the outlook for growth and inflation was conditional on the full implementation of all the monetary policy measures that had been decided."

Moreover, the economic recovery still faced headwinds.

The governing council therefore felt it was "important to implement firmly the (purchase programme) as announced in order to reap its full effects," the minutes said.

"Overall, members agreed that emphasis needed to be placed on a steady course of monetary policy with a focus on the firm implementation of the recent monetary policy decisions. The governing council therefore reaffirmed its intention to conduct purchases until the end of September 2016."

At the same time, the governing council felt that a "strong signal" needed to be sent to euro area governments "urging them to press ahead with structural reforms and to take measures to improve the business environment.

"Only with such complementary action could the full benefits of the monetary policy measures be reaped," the ECB insisted.

The ECB only started publishing its minutes this year in a bid to make the thinking behind its monetary policy decisions more transparent.

In doing so, the ECB is following the example of the likes of the US Federal Reserve and the Bank of England.

But unlike the Fed, the minutes do not reveal which central bank governor voted for or against a particular policy decision. The ECB said this was necessary to prevent the central bank chiefs being put under political pressure in their home countries.