In the accounts of June 9-10 meeting, ECB said, “it was stressed that the recovery was at an early stage and lacked robustness, as it depended heavily on policy support”. The projected path for the economy was ” was subject to significant uncertainties and risks”. An ” undue tightening of financing conditions at the current juncture could jeopardise the ongoing economic recovery and the outlook for inflation.”
Hence, “a noticeable slowing of the pace of purchases for the next quarter was therefore seen as inappropriate at the current juncture”. A remark was even made that, “in view of the persistent inflation shortfall projected in the June staff projections, even an increase in asset purchases as the main monetary policy instrument could be justified at present.”
Nevertheless, “in view of the better outlook for growth and inflation and the associated upside risks, it was, however, also argued that, to provide the same degree of accommodation, asset purchases should be scaled back somewhat.” Concerns were also expressed about potential side effects “if the highly accommodative monetary policy stance was maintained much longer.”
Overall, most members consent that net PEPP purchases should continue at a significantly higher pace in Q3. But the “reaction function” on purchases would “continue to rely on a joint assessment of financing conditions and the outlook for inflation over the medium term”.
