ECB deflation fears sparked QE launch

ECB minutes 'don't reveal that much'
ECB minutes 'don't reveal that much'   

Fears of continued deflation in the euro zone spurred the European Central Bank's (ECB) Governing Council to launch its controversial quantitative easing program in January, minutes of the key policy meeting revealed.

The document—the first-ever minutes of an ECB policy meeting—also showed that policymakers "broadly shared" the view that further stimulus was needed in an effort to help kickstart the moribund euro zone economy.

European Central Bank President Mario Draghi arrives for a press conference following the monthly ECB board meeting in the new ECB headquarters in Frankfurt am Main, Germany, Dec. 4, 2014.
Thomas Lohnes I Getty Images
European Central Bank President Mario Draghi arrives for a press conference following the monthly ECB board meeting in the new ECB headquarters in Frankfurt am Main, Germany, Dec. 4, 2014.

"Taking into account both the weakened medium-term outlook for price stability and the smaller than envisaged monetary stimulus...the prevailing degree of monetary policy accommodation was seen to fall short," the minutes said.

"Against this background, there was a broadly shared view that the conditions were fully in place for taking additional monetary policy action at the current meeting."

The "accounts," as the ECB calls them, shed light on one of the most crucial ECB meetings in years, after which President Mario Draghi announced the launch of a 60 billion euro ($70 billion) private and public bond-buying program. As much as a trillion euros of euro zone government bonds could be purchased under the scheme, which is due to begin in March.

One of the main aims of QE will be to drag the euro zone out of growth-sapping deflation and back towards the ECB's "just under 2 percent" target. Prices in the region fell by 0.6 percent year-on-year in January, after sliding into deflation for the time since 2009 in December.

'Benign neglect'

The Governing Council weighed these historically-low inflation figures and the impact of falling oil prices, the minutes showed.

"Against this background, the risk of second-round effects had increased further and, with it, the risk of too prolonged a period of too low inflation," they said. "This, in turn, raised the possibility of deflationary forces setting in, which would not permit an attitude of 'benign neglect.'"

January's announcement from the ECB means the central bank has joined the U.S. Federal Reserve, Bank of England and Bank of Japan in implementing a quantitative easing scheme in an effort to bolster its economy.

The minutes also revealed that the ECB policymakers considered a monthly purchase target of both 50 billion euros and 60 billion euros (which they eventually went with), and that corporate bond purchases were also considered.

ECB vs. FOMC: Santelli
ECB vs. FOMC: Santelli   

Not everyone was blown away by the amount of detail contained within the minutes, however.

"It doesn't actually reveal that much, " Mark Ostwald, strategist at ADM Investor Services International, told CNBC. "They key here is that what swung it is not wanting to appear to be taking a 'begin neglect' view to deflation."

Looking ahead, Rabobank strategist Elwin de Groot said the publication of the "accounts" could be useful, however.

"We believe these 'monetary policy accounts', at times, could still prove valuable, if only to clarify certain things or fill in the missing pieces of the puzzle," he said in a note.

- By CNBC's Katrina Bishop. Katy Barnato contributed to this report.