Members Agreed To Look Through Recent Inflation Upturn — ECB Minutes

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A recent jump in eurozone inflation, to 1.8% last month, has raised concerns about a toxic squeeze on the nation's savers from higher inflation and rock-bottom interest rates.

But the minutes of the ECB's January 18-19 meeting, published on Thursday, show that policy makers thought their job wasn't yet done. While policy makers acknowledged some positive economic news since their previous meeting, they decided that the fundamental economic picture remained largely unaltered.

"Therefore, the Governing Council was seen as well advised to remain patient and maintain a "steady hand" to provide stability and predictability in an environment that was still characterized by a high level of uncertainty", the central bank said.

Core inflation, which strips out volatile components such as fuel, remains at only 0.9 per cent across the bloc despite headline annual consumer price rises of 1.8 per cent reported in January.

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"The view was widely shared that there was, as yet, insufficient progress towards a durable and self-sustaining" rise in inflation, the minutes said.

ECB President Mario Draghi reiterated last month that the bank would continue its QE program through December, although its pace will slow after March to EUR60 billion a month from EUR80 billion.

The rise in United Kingdom inflation over the past twelve months - from 0.3pc to 1.8pc - has been exactly the same as in the Eurozone.

But the officials decided that such purchases should be limited, with priority given to bonds with yields of more than minus 0.4%, according to the minutes.

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It also said that the European Central Bank "remained prepared to adjust its purchase programme in terms of size and/or duration should the outlook become less favourable".

"The minutes confirm that the European Central Bank does not see any need for an adjustment of its monetary policy anytime soon", said Carsten Brzeski, an economist with ING-DiBa in Frankfurt.

Capital Economics said: "With regard to the limits of its asset purchase programme, the account once again outlined the ECB's commitment to prioritising the issue and issuer limits for purchases over other constraints". With asset purchases spread across the 19 central banks that use the single currency, the collective balance sheet of the Eurosystem swelled by a third to €3.662 trillion, the ECB said.

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