Interest Piqued For Minutes From First ECB Rate Meeting Of Lagarde Era

- Central bank watchers looking for signs of different tack from new president

- Possible hints about upcoming strategic review a key attraction

- Minutes due Thursday at 13.30 GMT


Frankfurt, 14 January 2020 (LS NEWS) – European Central Bank monetary policy was unchanged in December, but the account of the meeting to decide that may reveal how rate-setters work together with new president Christine Lagarde and how they view recent signs of Eurozone strength and plans for an upcoming strategic review.


Last month, during her first post-rate decision press conference as head of the ECB, Lagarde said she would use her “own style” to communicate the central bank’s policies, so the market will be keen on indications of any such shift contained in the minutes of December’s rate decision meeting.


Lagarde replaced Mario Draghi as president in November.


Nomura said, “In the accounts of the meeting we look for any discussion about the side-effects of negative rates as well as on the ECB assessment of the euro area economy, given the recent improvement in the business surveys.”


The index for IHS Markit Eurozone purchasing managers’ poll in December rose to 50.9 to ascend further into growth territory, but it remained near the expansion-contraction line at 50.0.


Recent surveys in Germany, Europe’s biggest economy, have also shown investors and local executives expressing increased optimism about the coming months.


Lagarde wants silence on strategic review


The Frenchwoman broached the subject of the bank’s strategic review during last month’s press conference, calling it “a little bit overdue”. She noted that the examination of bank policies will begin this month and run and until the end of the year, so monetary policy mavens will parse the account of the December meeting for clues about any possible changes.


Those expecting information about the review could be left wanting: Bloomberg reported Monday that Lagarde has sent letters to members of the governing council asking for their silence about any discussions on possible alterations to bank guidelines. With this in mind, expecting any information about the review in a heavily vetted account of a monetary policy meeting could be asking for too much.

One of the main subjects for speculation centers on a revision of the ECB’s inflation target of close to but below 2pct. A Financial Times poll of economists said more than half of those polled expect the central bank to jettison the goal and change it to a flat 2pct target.


At the moment, consumer price growth may be enough for the bank to carry on with the current policy. “At 1.3pct, inflation is still well below where the ECB would want it to be, but the slight pick-up in core inflation (which also rose to 1.3pct in December) should be enough for the ECB to justify maintaining its wait-and-see approach, following the large stimulus package deployed in September,” said Ángel Talavera, head of Europe economics at Oxford Economics.


“The strong dissent between hawks and doves within the governing council means that the bar for further stimulus remains high,” Talavera said.


According to the account of the September rate decision meeting, the conflict between the hawks and doves flared up before the bank enacted September’s broad monetary stimulus package, so the latest minutes could show further disagreements on the subject.


--- Eric Culp, European Editor