As expected, the European Central Bank (ECB) did not act to further ease its already extraordinarily loose monetary stance when its governing council met today in Valletta, the capital of Malta, the 19-strong currency club’s smallest member. But the ECB gave a broad hint that it was preparing to do so when the council convenes for its final monetary-policy meeting of the year, on December 3rd at its home in Frankfurt.
Speaking after today’s meeting, Mario Draghi, the head of the ECB, highlighted “the strength and persistence” of the factors that were currently preventing inflation from returning to the central bank’s goal of nearly 2%. That called for “thorough analysis” and a re-examination of the degree of monetary-policy stimulus (“accommodation”) when the council meets in December, at which point new staff forecasts would also be available. The decision in Malta was not one to “wait and see” but rather to “work and assess”, he added.
The ECB is already delivering a hefty stimulus to the euro area, following decisions taken between June 2014 and early 2015. It has introduced a negative interest rate, of minus 0.2%, which is charged on deposits left by banks with the ECB. It has also been providing ultra-cheap long-term funding to banks provided that they improve their lending record to the private sector. And, most important of all, in January it announced a full-blooded programme of quantitative easing (QE)—creating money to buy financial assets—which got under way in March with purchases of €60 billion ($68 billion) of mainly public debt each month until at least September 2016.
The Economist