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MNI (London)
By Christian Vits
     FRANKFURT (MNI) - European Central Bank policymakers drew a very positive
picture for the economic development in the euro area at their most recent
policy meeting, held Dec 13/14.
     The ECB's chief economist Peter Praet underlined that incoming information
"indicated a significant improvement in the growth outlook and continued
economic expansion at a pace exceeding potential," the bank said in its latest
minutes, published Thursday. At the same time, "price pressures remained
subdued," the report added.
     Further ahead, the economic expansion and the associated "significant
absorption of economic slack" were expected to a gradual convergence of
inflation levels in line with the ECB's target over the medium term.
     Several observations were made on the apparent disconnect between
developments in the real economy and price dynamics, according to the minutes.
     "This disconnect appeared to have persisted or even increased over recent
months, as growth had repeatedly been stronger than expected in the euro area
and inflation dynamics had remained largely unchanged or surprised on the
downside," the ECB noted.
     However, "confidence was widely expressed that, ultimately, the further
absorption of slack should lead to upward wage and price pressures."
     However, the report also disclosed some dissent among Governing Council
     "The argument was put forward that, as the economy expanded further, an
unchanged monetary policy setting would become increasingly expansionary, also
in view of the stimulus arising from the still increasing stock and of assets on
the Eurosystem's balance sheet," the report said.
     "A remark was made that a gap appeared to be emerging between favourable
economic conditions and a policy stance that remained in a crisis
configuration," the accounts said.
     But it was also noted that favourable economic and financial conditions
were still "dependent on an ample degree of monetary accommodation".
     While "a few members" pointed out their reservations concerning some
elements of the decisions taken at the October policy meeting, "the merits of a
steady hand in communication were widely acknowledged", the ECB said.
--MNI Frankfurt Bureau; +49 69 97782671; email:
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