ECB Record of January Meeting: Few Surprises

Minutes after the German finance ministry rejected Greece's offer, the ECB released its first record of its recent meeting.  The only item that rises to the level of a surprise might be that the ECB considered buying corporate bonds.   

The ECB calls its report an "Account of the monetary policy meeting of the Governing Council of the European Central Bank".  This seems to be a fair representation.   It was largely a summary of its decisions.   It was written from a high level and lacked much color.  Still, it represents a new front and phase of ECB communication. 

The ECB's governing council were unanimous in agreeing that the purchase of government bonds was a legitimate tool of monetary policy. This is important because the ECB's decision will likely face a legal challenge. The disagreement at the ECB  was over the timing.  Some, as in a minority, wanted to wait. 

The record of the meeting also included a review of the economic conditions.  It clearly statement that the macroeconomic outlook had appeared to stabilize.  Subsequent economic data, including the region's Q4 GDP and the PMI surveys confirm this assessment. 

There was a candid assessment that the ABS and covered bond purchases were falling short of expectations.    The increase in asset purchases to 60 bln euros a month, a 50 bln euro increase did not seem as controversial as the risk-sharing.  The record of the meeting does not appear to provide much details on who the 20% risk-sharing was agreed.  The fact that any was agreed upon is itself noteworthy.  Even in terms of the Eurosystem's creditor status (pari passu) was simply reported while the interesting debating issues were glossed over.  

Separately, we note that record of the ECB's meeting comes as it shifts to few meetings and a rotating voting system.  At first, many of our European contacts played down the rotating voting regime.  After all, during the early days of the  ECB, we are told, formal votes were not had regularly.  However, in light of the Greek developments, perhaps the rotating voting is more important.  For example, the decision to increase (or decrease ) ELA access requires a simple majority.  A decision to attach limits on the ELA borrowings requires a 2/3 majority.    Currently, Greece, Cyprus, Lithuania and Italy do not have the vote.  Starting in April, the voting rotation is somewhat more supportive for Greece.