21 February 2019

Bloomberg: ECB urged swift analysis, no hasty decision on new lending

Policy makers have demanded that analysis on long-term loans for banks is done quickly, though they haven’t fully committed to implementing a new round of funding. Given that more than 700 billion euros ($795 billion) of existing loans will mature next year, they said they’ll give “some consideration’’ to the issue.

“While any decisions in this respect should not be taken too hastily, the technical analyses required to prepare policy options for future liquidity operations needed to proceed swiftly,” the ECB said in the account of its January policy meeting.

The decision to look closer at new loans came amid agreement on the Governing Council that risks to the euro-area outlook have increased. Some of the ECB’s top officials have in recent days laid the groundwork for adjusting policy, following the footsteps of other central banks like the Federal Reserve.

The ECB cited risks including global trade disputes and the threat of a disorderly Brexit. Policy makers argued it’s difficult to judge the severity and persistence of the current soft patch, agreeing that they need to see updated projections to better read the situation.

That partly explains why they’re maintaining an element of caution about the next step. A similar situation is playing out at the Fed, which has paused tightening but signaled that if the economy improves, an interest-rate increase later this year can’t be ruled out. Markets had taken a different view ahead of the publication of the minutes of the Fed’s January meeting on Wednesday.

“No clear-cut conclusions could be drawn regarding the implications of slower growth in the short term for the outlook for activity in the medium term,” according to the ECB account. It will assess the situation “in more depth” in March, when it will also have new staff forecasts.

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