Philip Lane has been forced to intervene as the ECB scrambles after a rate meeting misstep that sent markets tumbling.
That was after his boss, the new head of the European Central Bank Christine Lagarde made what independent economists dubbed a “rookie mistake” yesterday when the bank announced its policy response to the coronavirus outbreak.
The Frankfurt-based bank was desperately trying to walk back Christine Lagarde’s comments in a press conference after markets fell when she said “we are not here to close spreads, there are other tools and other actors to deal with these issues”.
That along with the surprise decision by the ECB not to cut its interest rates was interpreted by financial markets, which have been in freefall all week due to concerns over the coronavirus, as signaling that the bank would step in forcefully to help Italy whose economy is especially vulnerable.
On Friday, the ECB’s Irish Chief Economist Philip Lane issued a blog, itself a first, in which he explained the bank’s decisions which stood in stark contrast the dramatic actions of the Federal Reserve that went early with a massive interest rate as well as the Bank of England which cut at its most recent meeting.
"We will not tolerate any risks to the smooth transmission of our monetary policy in all jurisdictions of the euro area," ECB chief economist Philip Lane said on Friday in the blog.
"We clearly stand ready to do more and adjust all of our instruments, if needed to ensure that the elevated spreads that we see in response to the acceleration of the spreading of the coronavirus do not undermine transmission," Lane said in a blog post, a new communication tool for the ECB.
Lagarde was criticised by both economists and politicians for her comments about spreads, as Italy is so far facing the biggest disruption in Europe from the coronavirus.
The ECB chief’s lack of experience compared with her predecessor Mario Draghi who is credited with rescuing the euro and whose term in office ended late last year, was shown as Lagarde had to put in a TV interview with CNBC to try and roll back the damage her earlier had inflicted on the institution’s credibility.
As well as Lane, the ECB rolled out French central bank chief Francois Villeroy de Galhau to speak in a damage control exercise.