The European Central Bank revealed Thursday that its policy-setting governing council is increasingly confident that its controversial bond purchase programme is helping to boost the economic outlook for the eurozone.
In the minutes of the governing council's meeting on March 4 and 5, published with a four-week delay, the ECB said that "members generally shared the assessment that significant positive effects ... could already be seen" from the new bond purchase programme. "Overall, the sentiment was widely shared that with the January monetary policy decisions, the governing council had added a sizeable further stimulus and had now deployed almost the full range of the instruments at the disposal of monetary policy in support of the economic recovery," the minutes stated.
And that was leading to "prudent optimism" about the recovery outlook, the minutes showed.
On January 22, the ECB had said it would embark on a policy of so-called "quantitative easing" (QE) or sovereign bond purchases to boost the worryingly low level of inflation in the 19 countries that share the euro. But some prominent ECB members - notably the head of the German central bank or Bundesbank Jens Weidmann and ECB executive board member Sabine Lautenschlaeger - have repeatedly expressed scepticism about the need and effectiveness of such a programme. Nonetheless, at the governing council's last policy meeting in Nicosia, Cyprus, in March, there appeared to be agreement that the programme was indeed helping to ease financial market conditions and the cost of external finance for companies, the minutes showed.
"Moreover, recent data on economic activity had been somewhat positive and there were signs of a turnaround in inflation dynamics... This provided grounds for 'prudent optimism' regarding the scenario of a gradual recovery and a return of inflation rates to levels closer to 2.0 percent," the minutes stated.
At the same time, there was "no room for complacency," the governing council members agreed.
"Overall, members saw the risks surrounding the euro area economic outlook as remaining on the downside, although they had diminished following recent monetary policy decisions and the fall in oil prices," the minutes said.
Those risks stemmed from geopolitical and political risks "inside and outside the euro area."
A major downside risk was insufficient progress on structural reforms.
In order to complement the ECB's measures, "determined policy action was needed in other policy areas," according to the governing council.
"A strong message to governments was warranted to seize the opportunity for a renewed impetus for structural reforms to boost potential growth," the minutes said.
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