The “pigeons” nested in the ECB

Le siège de la Banque centrale européenne, à Francfort.

Posted on January 21, 2021 at 6:14 am

The twin towers of the European Central Bank (ECB) overlooking the Main are more of a dovecote than an eagle’s nest. Commerce Bank strategists analyzed the distribution of the ECB Governing Council between “hawks”, patrons of monetary conservatism and “pigeons” who argue for strong central bank support for the economy. In terms of numbers, the second is the highest: sixteen against five falcons. Four central bankers, including German Isabel Schnabel, a member of the ECB’s executive board, classify their position as neutral.

A balance that is not going to change. With the arrival of Dutch Frank Elderson, who replaced Luxembourg’s Yves Mersch on the executive board on December 15, he will no longer be head of the ECB for six years. The same should be true of the governors of the national central banks that make up the eurosystem. The six-year term of Fran ഡിois Villeroy de Gaulle, head of Bank de France, expires at the end of the year but can be renewed once and for all. Lithuanian Vitas Vasiliaskas and Maltese Mario Vella can also claim their succession.

A few hawks

On closer inspection, Jens Weidmann, president of the Bundesbank, is the last of the “real” hawks. Bank of Austria Governor Robert Holmesman is now considered by Commerce Bank analysts to be one of the “moderate” hawks. Although he is considered “less rude” than his predecessor, Frank Elderson’s new find is also in this category.

« This ranking is subjective because it is based on statements made by members of the Board of Governors, who acknowledge the authors of the study. However, the latter is rare in the case of Frank Elderson. The latter now focuses on the side effects of monetary policy during a pre-MEIP hearing.

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On the pigeon side, Commerce Bank has ECB President Kristin Lagarde, albeit more moderate than her predecessor. This genus also includes Franോois Villeroy de Galhu. Vice President Louis de Guindos, Chief Economist Philip Lane and Fabio Panetta are the more solid pigeons, the Governor of the Bank of Ireland and the Central Bankers of southern European countries.

The culture of consensus

Do we have to assume that the ECB, which is visiting this Thursday, has the generous hand to pursue a policy that is even more inclusive? This is not simple. ” While personal sentiment about monetary policy is certainly important for governing council decisions, it is crucial. Says Commerce Bank. In addition, Christine Lagarde has included her presidency in the sign of consensus. The falcons make a louder noise than the relative weight.

The council held in December is an example. The initial draft decision resulted in an increase of 7 750 billion in the ECB’s Emergency Program Envelope (PEPP). It was reduced to $ 500 billion during the council’s deliberations. ” The envelope should not be fully utilized if the situation improves, the press release said. », Certifying German bank.

Conclusion, For Commerce Bank: “ We need to pay close attention to what the “neutral” members of the board say, because the signals they send are likely to indicate the future direction of monetary policy. »

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