Account shows ECB feared low inflation becoming ingrained
FRANKFURT, Germany (AP) — Officials at the European Central Bank discussed fears that weak inflation was becoming ingrained in the economy before they launched their latest round of stimulus last month.
A written account of that March 10 meeting says "risks of second-round effects appeared to have increased" since the bank's previous meeting.
Second-round effects are when people expect low or falling prices, leading them to set lower wage and price agreements. That can be poison for the economy.
The decision on the stimulus wasn't unanimous, however. It faced questioning from at least a few members.
The bank decided to step up its bond-buying program, offer new ultra-cheap loans to banks, cut its benchmark interest rate to zero, and increase penalties for banks that leave money at the central bank rather than lend it.