Account illustrates European Central Bank's fears of deflation in debate over stimulus

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FRANKFURT, Germany — The European Central Bank's governing council members wrestled with fears that falling prices could become ingrained in the eurozone economy before a "large majority" decided last month to launch a 1 trillion euro monetary boost.

That's according to an account of the ECB's historic closed-door deliberations on Jan. 22, when it acted to revive the economy of the 19-country eurozone.

With Thursday's publication of the account, the ECB joins the U.S. Federal Reserve and the Bank of England, which both reveal minutes of their meetings weeks afterward.

The ECB launched its latest stimulus plan after finding that the effect of earlier stimulus efforts such as cheap loans to banks "was more limited" than expected.

Some members argued the risk of outright deflation was "relatively small." That view ran into "broad agreement" that the risk "even if uncertain" was too great to hold off on taking action.

The ECB avoided calling the 18-page documents "minutes," referring to it as an "account" as it attached no names to any of the arguments contained in it. The ECB is juggling the desire to be more transparent with concern that the national central bank heads who sit on the board could face political pressure at home for not acting in perceived national interest. They are supposed to choose one monetary policy that's good for the whole 19-country currency union.

The original proposal for the stimulus in January was for 50 billion euros in monthly bond purchases to end at the end of 2016. But the board decided to front-load the purchases by raising the amount to 60 billion per month through September 2016, keeping the amount the same.

The bank says the purchases could continue if needed to boost inflation. The eurozone economy saw prices fall by 0.6 percent annually in January.

While some felt the risk was small of falling prices becoming ingrained in the economy, the majority felt that the chance of that "even if uncertain, constituted a major downside risk to the inflation outlook." Japan fell into deflation — that is, a chronic fall in prices — in the 1990s and is still struggling to get out.

Bank dissenters, described as "some members," warned about the side effects of massive bond purchases, which can drive up prices across different financial markets, such as stocks. The account said members expressed concern that bond purchases could "trigger the mispricing of risk and feed financial market exuberance." That view was countered by the notion that regulatory action could contain any market excesses.

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