European Central Bank policymakers strove in an October meeting to restore “unity” and rally behind fiercely fought-over measures decided in September, an account published Thursday showed.
“A strong call was made for unity of the governing council” made up of the ECB’s six-strong board and 19 national central bank governors from eurozone nations, the account recorded.
Former president Mario Draghi said following the October meeting that his opponents had called for unity and said “bygones are bygones” after the previous month’s battles.
Governors agreed in September to further lower the interest rate on banks’ deposits in Frankfurt, loosen conditions on cheap loans to lenders and restart “quantitative easing” (QE) bond-buying from this month.
While backers of the moves justified them with a slowing eurozone economy plagued by trade fears, opponents said inflation had not yet fallen far enough below the ECB’s just-below-two-percent target to make them necessary.
The acrimonious debate boiled over in newspaper interviews and led to the resignation of one German board member.
But by October, some members found new data “had confirmed the pronounced slowdown in euro area economic growth and a continued shortfall of inflation… thus vindicating the monetary policy decisions,” the account showed.
In what reads like a rearguard action from tough-love “hawks”, parts of the governing council insisted that “the measures should be allowed more time to fully unfold their effects” before the ECB moves in response to new developments.
“A plea was made for patience,” the account showed.
Since Draghi’s departure at the end of October, new central bank chief Christine Lagarde has looked to renew bonds of trust among governing council members.
In a photo tweeted from her account on November 14, the 25 relaxed and smiling central bankers were seated around a circular table in a plush hotel outside Frankfurt.
Following the “retreat” away from the ECB’s glass-and-steel tower, former French finance minister Lagarde is scheduled to speak at a Frankfurt banking conference on Friday.
Markets are on tenterhooks for any hints about future policy.
The account showed that the central bankers still see some warning signs on their dashboard, including weakness in industry that risks spreading to the service sector.
“An increase in underlying inflation might not readily materialise given the current weaker macroeconomic outlook,” some noted.
That could translate into new action sooner rather than later, if the governing council sticks to Draghi’s injunction last month to “never give up” on the inflation goal.