Home BUSINESS The European Central Bank gathers on the hillside to discuss key strategic issues

The European Central Bank gathers on the hillside to discuss key strategic issues

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The President of the European Central Bank will meet in Frankfurt on Friday to discuss everything from changing the European Central Bank’s inflation target to Make Monetary policy is greener, with a view to readjusting the euro zone’s policy making in the next few years.

A three-day retreat on the hills overlooking Germany’s financial center-this is the first face-to-face meeting of the bank’s management committee since the pandemic began-will examine the areas where consensus has been reached that will constitute Europe Central Bank Governor Christina Lagarde outlined the pillars of the planned strategic review in September.

Yannis Stournaras, governor of the Greek Central Bank and member of the European Central Bank Board of Governors, said that the meeting was “critical to reach the greatest possible consensus on some outstanding issues”. “By the end of summer, we will agree on a new strategy.”

Another member of the ECB Council said: “We have held virtual seminars on various topics under review, but we have not had the opportunity to discuss everything together. I think there are more areas for consensus than disagreements. This is exploration. Great opportunities in these areas.”

Soon after Lagarde succeeded Mario Draghi in November 2019, the agency decided to revisit its strategy — the first such review since 2003. Delayed for some time due to the pandemic, the review will be completed this fall.

Twenty-five board members-including 19 central bank governors of the euro zone-reached consensus on the ECB’s idea of ​​action. climate changeAccording to insiders and analysts, this is one of the most heated issues among central bankers.

Greece’s central bank governor Yannis Stournaras said the finance ministers will agree on a new strategy before the end of the summer. © Herbert Neubauer/AFP/Getty Images

The governor of the Bundesbank, Jens Weidmann, has long been regarded as one of the main opponents of green monetary policy. For the first time this month, he said that he will support the European Central Bank’s asset purchase and collateral policy to “decarbonize”.

Maria Demertzis, deputy director of the Bruegel think tank in Brussels, said: “The paradox is that it seems that the greater consensus will be the greening of monetary policy.” Is the most unexpected area.”

Lagarde Said this week She hopes that once the new strategy is finalized, “climate change will have room”, and told Politico that this “will show that the European Central Bank is careful and capable of adjusting and adapting.”

There is less consensus on the European Central Bank’s inflation target. Most council members agreed that the current inflation target “close to but below 2%” is outdated-Lagarde said it “confuses observers and the market”-but there are disagreements on what should replace it.

Some policymakers, such as the chief economist of the European Central Bank Philip Lane And the Governor of the Bank of Finland Ollie Lane, They told the Financial Times that they believed it would be beneficial to follow the Fed’s shift to the average inflation target. This means allowing inflation to exceed the target to make up for a period of time below the target.

Others said they prefer the simpler 2% target and worry that following the Fed’s footsteps may complicate the message. A board member wanted to know “how it will work” with an average inflation target.

Christine Lagarde, President of the European Central Bank

Christine Lagarde, President of the European Central Bank, plans to outline a strategic review in September © Olivier Matthys/Reuters

Some people support the idea of ​​setting a “tolerance zone” around its inflation target. Similar to the Bank of England, when inflation is higher or lower than its 2% target by more than 1 percentage point, the Bank of England will write an explanation letter to the Chancellor of the Exchequer.

The central bank is also very sensitive to the public criticism it received during its “period.”The European Central Bank listens“Online incidents, especially monetary policy did not fully consider the view of rising housing costs.

“Housing is a key point,” Lagarde said in an interview with Politico. “People are also interested in what the European Central Bank can do to help solve the unemployment problem and what we can do with wages.”

The European Central Bank may push Eurostat to follow other countries Owner-occupied house In its inflation data-although this is technically difficult, it may take years to achieve.

Officials believe that the public’s trust in the European Central Bank is still too low, only 46%-even according to the latest data, last year this figure was higher than last year’s 40%. Eurobarometer Investigation of citizens of the Eurozone. “We need to improve our communication, full stop,” a board member said.

The policy maker stated that in order to solve this problem, the “European Central Bank Listening” event may become a permanent feature, adding that its communication should be more “rooted in our understanding of the labor market” to show It focuses on employment as much as bond prices.

Since March 2020, the board of directors has not met in person. Its members will return to Frankfurt in late July to hold the first face-to-face monetary policy meeting in 16 months.

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