ECB minutes of the December meeting were largely hawkish, but some discord was seen over QE. Some ECB members were against any extension of the institution's mass bond-buying programme as inflation picked up in the euro zone, minutes of a December meeting showed today.

ECB officials noted at their December meeting that the bloc’s economic recovery was gathering strength. The decision to slow the pace of bond purchases reflects a lower probability that the region will slide into deflation, according to the minutes.

However, minutes showed that officials remain worried about political uncertainty. A series of national elections are scheduled to take place this year in some of the eurozone’s biggest economies, including Germany and France.

Latest survey evidence points to an acceleration in growth in Q4, following 0.3 percent q/q in Q3. Headline CPI inflation is also picking up quickly, rising to 1.1 percent y/y. But, underlying ‘core’ CPI inflation has remained within a narrow range this year, mostly below 1.0 percent.

ECB policy seems to be on a preset course this year, but President Draghi has said that the pace of asset purchases could be ramped up if downside risks to the economy materialise. Minutes confirmed that there was a strong consensus in favour of buying assets throughout 2017. Reduced purchases was favoured as it would put less pressure on market liquidity, while also leaving room for upscaling support in the future if needed.

"Our central scenario for growth and inflation would point to the ECB winding down its programme in 2018. We have revised our forecast for the 10-year bund yield marginally to 0.6% from 0.7% for end-2017, rising to 1.2% by end-2018." said Lloyds Bank in a report.