Some ECB members called for 20bp cut at December meeting - Minutes

Some policymakers at the European Central Bank argued for a larger cut to interest rates when they met in December, the minutes of that meeting showed.

Some rate-setters called for a 20 basis point reduction in the ECB’s deposit rate on 3 December, instead of the 10 basis point cut to -0.3% which they finally decided upon.

The deposit rate determines how much the central bank pays to lenders for depositing their funds with it and a larger reduction was expected by some to pile the pressure on the single currency.

In the run-up to the ECB’s meeting some analysts had argued that a large reduction in the deposit rate was necessary in order to weaken the euro.

Governing council members also chose to extend the length of their bond buying purchase programme until March 2017, while keeping the monthly pace of purchases steady at €60bn worth of debt instruments per month.

The decisions taken and ECB president Mario Draghi’s description of the policy changes as “adequate” underwhelmed investors, resulting in a sharp bounce in the single currency.

At the time some observers claimed that the ECB's decision to forego a larger cut had made it easier for the US Federal Reserve to pursue its first interest rate hike since 2006 a fortnight later, on 15 December.

“Some members expressed a preference for a 20-basis-point cut in the deposit-facility rate at the current meeting, mainly with a view to strengthening the easing impact of this measure. The possibility was also raised of expanding the monthly volume of purchases,” Thursday’s minutes read.

A “reassessment could be made in the future,” the minutes also said, adding that a smaller cut had “the advantage of leaving some room for further downward adjustments, should the need arise.”

However, a “few” governing council members also argued in favour of only reducing the deposit rate.