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By Balazs Koranyi
FRANKFURT - European Central Bank policymakers are concerned that growth is even weaker than earlier thought and a package of measures may be the best way to combat the slowdown, the accounts of the July 25 meeting showed on Thursday.
With growth and inflation slowing for months, ECB President Mario Draghi has all but promised more stimulus as soon as September and a steady flow of dismal data since the meeting has only reinforced the case for more support.
The accounts of the meeting showed options on the table for the ECB include a combination of a rate cuts, asset purchases and changes in the guidance on interest rates.
The bank could also offer more support for the bank sector, which transmit easy policy to the real economy through a relief from the ECB's negative interest rate.
"The view was expressed that the various options should be seen as a package, i.e. a combination of instruments with significant complementarities and synergies," the ECB said.
"Experience has showed that a package - such as the combination of rate cuts and asset purchases - was more effective than a sequence of selective actions," it added said.
A multi-tier deposit rate may be among the most controversial measures under consideration.
Some policymakers argued that negative rates were increasing pressure on the bank sector while others warned about the unintended consequences of such a policy shift.
With Draghi handing the reins to Christine Lagarde at the end of October, he has just two policy meetings left at the helm of the ECB, leaving the same day the UK is due to exit the European Union.
Policymakers at the July meeting also expressed concerns as incoming data pointed to another cut in the ECB's forecasts and trouble outside the euro zone threatened to infect the bloc's economy.
"Available 'soft' indicators at present pointed to slower growth in the third quarter of 2019, raising more general doubts regarding the expected recovery in the second half of the year," the ECB said.
"Downside risks had become more pervasive and that their persistence could ultimately also necessitate a revision to the baseline growth scenario," the ECB added.
With a more protracted slowdown, there was also a risk that weakness in industry could spill over into services as manufacturing tends to be a leading indicator.
The euro zone barely grew in the second quarter and Germany, the bloc's biggest economy may already be in recession as a global trade war, China's slowdown and Brexit uncertainty holds back export demand and saps confidence in its vast manufacturing sector.
Although the domestic economy has held up relatively well, there are already signs that imported troubles are starting to impact growth with jobs growth slowing and confidence in the services sector also easing.
(Editing by Francesco Canepa)