European Central Bank policymakers failed to agree on a new policy guidance when they finalised the conclusion of a broad strategy review and will revisit the issue on July 22, three sources familiar with the discussion said on Thursday.
The ECB unveiled a new inflation target on Thursday and carved out a role to fight climate change, heralding a potentially fundamental change in how it sets policy.
While policymakers agreed on the conclusions of the review unanimously, they failed to agree on what this means for policy in the short term, particularly how the bank’s so-called “forward guidance” should be amended.
This guidance sets out the conditions under which asset purchases would end or interest rates would rise and is used by the ECB to set long term expectations among investors.
A sizable chunk of policymakers in the 25-member Governing Council argued that the new strategy called for a more persistent policy of monetary accommodation and this must be reflected in the forward guidance to signal to markets that the ECB will be supporting the economy longer, the sources said.
An ECB spokesperson declined to comment.
But others argued that the review is not a policy meeting so policy decisions should not be made in such a gathering.
Some also opposed any big change in the guidance arguing that the new, symmetrical 2% inflation target is not very different from the bank’s previous goal and the inclusion of housing cost would actually raise not lower inflation.