Christine Lagarde and her colleagues took past experience into account
Hot summer and hot debates at ECB’s meeting
Never argue with a woman. You’ll be ashamed of both winning and losing. Christine Lagarde must be well aware of that: she does whatever she wants and twists the male members of the Governing Council around her little finger. What’s interesting is that it doesn’t look like Mario Draghi’s excessive independence — he wouldn’t even try to make a compromise and said whatever had come to his mind. Christine Lagarde maneuvers successfully between the hawks and the doves of the ECB, and the former have had to agree with her so far.
I always know when my wife doesn’t feel well. If she keeps silent, she’s ill. So, Christine Lagarde feels well. She was pretty eloquent when talking to journalists after the Governing Council’s meeting. Nobody even suspected that the debate had been quite heated. Jens Weidmann and Pierre Wunsch are indignant at not raising the interest rate until inflation reaches the 2% target well ahead of the end of its projection horizon in the long term. Such prospects don’t look understandable and imply leaving borrowing costs at the present level for at least the nearest five years. The hawks were so outraged that one of them left the meeting before its end, slamming the door.
Germany’s lobby group in the ECB often went off into hysterics, gave up their chairs, or even brought a lawsuit against QE, accusing it of violating a ban on the direct financing of governments. Jens Weidmann still believes that the €1.85 trillion emergency bond-buying program must be withdrawn once the pandemic ends. The Central Bank has already decided it will end in March 2022. Isn’t that too optimistic?
What doesn’t kill you doesn’t last long after. QE isn’t a panacea for the eurozone’s all problems, but I’m sure it will do more good than harm in the current circumstances. And the program appears to last long — if not in the form of PEPP, then in the form of increasing assets buyout volumes under previous QE programs. It sounds like reincarnation!
Mme Lagarde explained that the ECB wouldn’t withdraw monetary support ahead of time not to hamper the eurozone’s economic recovery, relying on past experience. She must mean her predecessor Jean-Claude Trichet who raised the rate and provoked a recession in the currency bloc. The strategy of learning from the mistakes of others is good, and so is an ability to remember them.
– Remind me to tell you a sad story
– About memory?
The EURUSD‘s reaction to the ECB’s meeting in July is just “much ado about nothing.” After an upsurge and a subsequent fall, the pair returned to the previous levels. Now, wait for the dust to settle or to be raised again. Around the Fed’s meeting, this time. However, that’s how the market lives: moving from one event to another. Get used to it already.
Price chart of EURUSD in real time mode
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