European Central Bank policymakers are set to take a more benign view of the economy when they meet on June 8 and will even discuss dropping some of their pledges to ramp up stimulus if needed, four sources with direct knowledge of the discussions told Reuters.
With economic growth clearly shifting into higher gear, rate setters are ready to acknowledge the improvement by dropping a long-standing reference to downside risks in the bank's post-meeting opening statement, calling risks largely balanced, the sources said. Growth indicators have been outperforming expectations all year.
But they disagree on how quickly the ECB should change its policy stance, including its guidance, with countries on the currency bloc's periphery fearing that a sharp shift in its communication could induce self-defeating market turbulence, they added.
"After the French election the political risk is clearly down and economic indicators are by and large positive, so it's time to acknowledge this," said one Governing Council member who declined to be named.
Having fought off the threat of deflation with years of extraordinary stimulus, the debate within the ECB is shifting to the pace of normalisation, pitting doves who want incremental changes against conservatives who fear that the ECB could miss its cue, forcing more abrupt moves later.