First monetary policy advice this Thursday for the president. A reflection on the missions of the
bank risks exacerbating the confrontation between "doves" and "hawks".
MONETARY POLICY With her finest pen, Christine Lagarde has left her signature, which will appear on
the new euro banknotes, in our wallets from mid-2020. A strong symbol of
power of the new President of the European Central Bank since 1 November. This Thursday, she
leads its first monetary policy council, a major meeting of the institution, eight times a year.
No major decision is expected, since his predecessor, Mario Draghi, had taken care of him
leave a legacy of a package of measures applicable without time limit, in response to the slowdown
economy of the euro area. In particular, negative interest rates on bank deposits and a
asset purchase program (quantitative easing) of 20 billion euros per month (see below).
Christine Lagarde still has her work cut out for her. Its first project consists of restoring a
semblance of unity in an assembly torn by deep divisions on this monetary policy.
"Hawks" or "doves", the nineteen governors of national central banks and six members of the
board that compose it now display their differences in broad daylight. History of tightening the
links, Lagarde invited them to a seminar in a luxurious castle near Frankfurt last month.
She hopes to find an "efficient and healthy" way to manage disagreements, in the absence of an "ideal" consensus.
Some members are calling for systematic votes on decisions, like at the Fed or the Bank
from England. “We can probably expect a truce. On the other hand, a reconciliation seems illusory
between positions that not only reflect quarrels between people or doctrines, but above all
the fragmentation of the euro zone,” says Éric Dor, an economist at Ieseg.
Faced with these dissensions, the new big moneymaker of the eurozone has decided to put things flat.
It will launch a strategic review of the monetary policy framework, the first since that initiated by
Jean-Claude Trichet on his arrival in Frankfurt in 2003. It was then that the inflation target was established
for the euro zone “close to but below 2%”, a convoluted and controversial formula which will be
screened.
Here again, the debates promise to be lively. Some call for an outright modification of the figure
of the inflation target. The former chief economist of the IMF, Olivier Blanchard, recommends 4%. Others consider to
conversely that 1.5% would be more in line with the European reality (1% in October). In fact, there are few
chances of seeing the target change. On the other hand, the call for more "symmetry" on either side of the 2%
could be heard. That is to say that we could be close to the objective, below as well as above. This
would be another defeat for the Falcons. “The Germans are very opposed to it, because it would imply
to add an additional layer of monetary easing to aim higher", explains Frédérik
Ducrozet, economist at Pictet.
The introduction of new criteria, such as employment, as is the case at the American Federal Reserve (Fed),
does not correspond to the mandate of the ECB fixed by the European treaties. Implicitly, that of the stability of
price takes into account growth and employment. The ECB has proven, with a very creative monetary arsenal,
that it had leeway to meet these economic policy imperatives
European. Even if the results are not necessarily there. “We should not give the impression of reviewing the strategy at a time when we cannot achieve the objective set by the mandate”,
warns Alain Durré, economist at Goldman Sachs, formerly of the Frankfurt institution.
Christine Lagarde nevertheless intends to innovate, by integrating the fight against climate change into
the spectrum of its strategic review, in line with the priority decreed by Ursula von der Leyen for the
Committee. A concern that his Bank of England counterpart, Mark Carney, has been the
first to add to its missions as early as 2015, unlike the Fed which recently removed it from its own
strategic review. The Governor of the Banque de France, François Villeroy de Galhau, supports the initiative,
judging the climate as "a strategic priority for the ECB", unlike its counterpart in the
Bundesbank, the very hawk Jens Weidmann, who does not want to hear about it. The unity around the table is
therefore far from being found.
The mandate of the former Minister of the French Economy in Frankfurt will also perhaps see the birth of a
digital euro. The Central Bank is actively working to respond to cryptocurrency projects, such as
Facebook 's libra , with its own solution to the disappearance of cash and the dematerialization of
trades.