Wednesday 16 October 2019

Furore in Frankfurt: ECB rebels oppose Draghi and Lane plan

Pressure: Outgoing ECB president Mario Draghi with economist Philip Lane
Pressure: Outgoing ECB president Mario Draghi with economist Philip Lane

David Chance

A third of the interest rate setters at the European Central Bank (ECB) opposed plans to restart bond purchases last month, a split that sets the stage for conflict under its incoming chief.

According to the official minutes from a September 11-12 meeting, most policymakers backed a rate cut and plans to loosen monetary policy further, but "a number of members" opposed the latter.

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ECB president Mario Draghi and chief economist Philip Lane have publicly defended the shift, but face unrest.

After the September meeting, central bank heads from the Netherlands, France, Germany and Austria gave interviews opposing the decision. "Judging from the latest series of news reports, press statements, interviews and rumours, the ECB seems to be in the middle of a War of the Roses," said Carsten Brzeski, the chief economist at ING Germany.

The initial response to the ECB's September rate decision was that Mr Draghi had bought time for incoming chief Christine Lagarde, and built a consensus around the policies that she would be able to follow. That has now been exploded.

"Ms Lagarde will inherit an acrimonious council. She may also face demands for a change in the way that the ECB takes decisions; indeed, these could ultimately prompt the bank to move to a more transparent system," said Andrew Kenningham of Capital Economics.

Irish Independent

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