By Laurie Laird
FRANKFURT (MaceNews) – European Central Bank rate setters have largely settled their policy disagreements, according to ECB President Mario Draghi, while acknowledging that global central banks are coming under increasing political pressure.
Addressing reporters after his final meeting, Draghi described a “general call for unity” among governing council members, after a number of representatives publicly disagreed with last month’s decision to reduce interest rates further into negative territory and resume the ECB’s quantitative easing program. “Some of the dissenters called … for full implementation of the policy package,” said Draghi, adding that “another said, ‘let bygones be bygones.”
Draghi finishes his eight-year term on the final day of October, to be replaced by former International Monetary Fund Managing Director Christine Lagarde. Lagarde attended Thursday’s meeting, but did not participate in discussions or deliberations, according to Draghi, who expressed confidence in his successor, despite her lack of central banking experience.
“No advice is needed .… She knows what to do,” said Draghi, dismissing questions of Lagarde’s economic credentials. “The quality of our deliberations owes so much to the quality of the work of the staff.”
Thursday’s discussions were largely devoted to “embedding policy expectations” in the wake of the aggressive stimulus announced in September. In the wake of that package, the governing council effected no policy changes this month, leaving its main deposit facility at a record-low -0.5%.
The outgoing president batted away questions about discord on the council, after central bank officials in Germany, Austria, the Netherlands and France publicly questioned last month’s easing measures. Draghi stressed that subsequent market movements suggested investors support for the central bank’s decision. In the wake of the September move, “we saw a flattening of the yield curve … and we saw the complete transmission … into lower short-term rates.”
Draghi also repeated that weakening growth, particularly in the service sector, argues for extended accommodative policy. “Unfortunately, everything that’s happened since September has shown that the governing council’s determination to act in a substantive manner is justified. All kinds of survey indicators are showing further weakening of the economy.”
The outgoing president repeated his calls for greater euro zone fiscal stimulus to supplement monetary measures, while admitting that rate-setters around the world have fallen under harsh criticism from elected leaders. There has been “more political pressure in the last year than in many years before,” said Draghi, adding that pressure from euro zone officials was less intense than in other — unspecified — countries. The criticism “is much less so for the ECB. I have had occasional exchanges with this or that finance minister, but it never became comparable with what you see today.”
As for his future plans, Draghi did little to discourage speculation that he is mulling a move into politics in his native Italy. When asked — repeatedly — of his next move, Draghi encouraged reporters to, “ask my wife.”
— Courtesy of MT Newswires