FRANKFURT (Reuters). The September 9th accounts showed that the European Central Bank’s policymakers debated a greater cut in assets purchases and had more inflation concerns than the post-meeting communication indicated.

Now that the economy is on a sound footing, and with inflation at a level well above the ECB’s target for December, policymakers prepare to have a crucial debate on how to end support. Also, they will discuss whether longer-term inflation prospects still call for additional stimulus measures.

The ECB made a token, but nonetheless significant move last month to stop pandemic-related stimulus. It decided to moderately reduce bond purchases. Some policymakers argued for a greater reduction because the central bank’s reaction was not in line with recovery.

According to the ECB, “It was argued the symmetric use of the (Pandemic Emergency Purchase Programme Framework) framework would lead to a less substantial decrease in the pace at which purchases are made.” According to this view, purchases should be at least equal to those made in the first year.

Some policy-hawks even went further and argued that investors had been well-prepared for ending emergency purchases.

The accounts revealed that “the argument was made, that the markets had already expected an end to net assets purchases under the PEPP by march 2022.” “It was pointed out that even without the PEPP the overall monetary policy position remained extremely accommodative.”

The ECB decided to take a cautious approach, as it feared that a greater stimulus cut would be seen by some as a way of exiting its easy monetary system. This was a risky move considering the low inflation prospects in the medium term.

INFLATION

Christine Lagarde, chief of the ECB, played down inflation concerns after the policy meeting. However, accounts revealed greater concern about price pressures, even though policymakers maintained their base view that prices would fall next year.

Last month, inflation jumped to a high of 3.4%. This could rise to 4% next year. However, the ECB is concerned that prices will continue to fall below their target for the coming years.

The accounts revealed that “Risks to inflation outlook…were widely regarded to be tilted towards the upside”, with policymakers arguing for the need to monitor a potential “regime change” in inflation.

Wages were not indicative of high inflation, but some warn that supply bottlenecks, excess savings and the duration of the spike could all lead to higher second round inflation.

Amid the high inflation rate this year, policymakers also considered whether or not their projection models were accurate.

“This raised doubts about how well the models relied on in the projections were able to capture what was currently happening in the economy, the structural changes implied by the pandemic and the impact of the ECB’s new monetary policy strategy,” the ECB said.