Thursday, 21 November, 2019
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2019-11-21 12:30:00.8 GMT
By Piotr Skolimowski
(Bloomberg) — Mario Draghi’s tenure as European Central
Bank president ended with an impassioned plea that policy makers
stop airing differences in public and display a united front in
the fight to revive inflation.
The Governing Council’s final meeting before the advent of
Christine Lagarde proved an occasion for officials to restate
their resolve in achieving the price stability that has eluded
them for much of the past decade, according to an account of the
Oct. 23-24 gathering released on Thursday in Frankfurt.
The ECB had been left reeling from an unprecedented row
after Draghi insisted on resuming of quantitative easing against
the wishes of governors from major economies. The account of the
October meeting, which by convention doesn’t identify who argued
what on policy, shows how the institution’s leadership sought to
come to terms with the fallout from that public dispute.
“Looking ahead, a strong call was made for unity of the
Governing Council,” the ECB said. “While it was underlined that
open and frank discussions in the Governing Council were
absolutely necessary and legitimate, it was regarded as
important to form a consensus and to unite behind the Governing
Council’s commitment to pursuing its inflation aim.”
Lagarde, who replaced Draghi on Nov. 1, sought to mend
bridges by taking her Governing Council colleagues on a retreat
to a luxury hotel this month to discuss how they will work
together. She is due to deliver a speech in Frankfurt on Friday
in what may be her first official remarks on monetary policy.
Her first press conference is on Dec. 12.
Those comments could potentially build on an attempt by the
ECB leadership to give a statement of intent about the use of
further monetary easing in future if needed.
“Strong commitment by the Governing Council to providing
the necessary policy stimulus was seen as important to ensure
the sustained convergence of inflation,” according to the
October account. “It was vital for the Governing Council to
remain prepared to act by using its full set of instruments.”
At that meeting, there was also a plea “for patience” to
allow current easing to work, supporting a “wait and see”
The ECB’s bid to signal a more galvanized resolve about the
use of monetary tools in future contrasts with comments since
the decision by a number of policy makers, who signaled they see
little room to go beyond the current stimulus package.
France’s Francois Villeroy de Galhau suggested last week
that interest rates are unlikely to fall much further. His Dutch
colleague, Klaas Knot, argued the ECB should be more cautious
with unconventional policy tools like QE. Both men had opposed
the decision to resume bond purchases.
The ECB’s view at the October meeting was that the latest
economic data remained downbeat, suggesting weakness “was likely
to persist,” a scenario potentially worse than they forecast in
Data since then have signaled some stabilization. The euro-
area economy grew a little faster than expected in the third
quarter, while Germany avoided a recession.
At the October meeting, policy makers also agreed that
possible side effects of their easing should be monitored, a
message reinforced by the ECB’s own Financial Stability Review.
Vice-President Luis de Guindos, presenting that assessment on
Wednesday, said that those impacts from loose monetary policy
are becoming more tangible, adding it is is encouraging
Lagarde Silence on Policy Strands ECB Watchers in Rate FogECB’s
Guindos Says Bond Purchases Won’t Hit Limits in Short TermECB
Flags Risks to Financial Stability From Its Own Stimulus