Christine Lagarde politely (or perhaps no-so-politely) asked her colleagues at the ECB to wait a few days before complaining following policy meetings. She’s also concerned about leaks, according to Reuters.
The irony is too much to bear. Reuters is often the go-to venue for ECB “sources” stories. On Friday, they were the source of a story about Lagarde’s efforts to prevent such stories from finding their way into the media.
The ECB, like it peers across developed economies, is struggling to find the right balance between policy tightening to fight generationally high inflation and threats to growth. The situation is especially vexing in Europe, given the drag from the war in Ukraine.
Although final readings on headline and core CPI for March showed a slight downtick from preliminary prints, price pressures remain acute (figure above).
Markets are now betting on multiple rate hikes by year-end. Those bets, predicated on a hawkish cacophony from policymakers, triggered a monumental selloff in the German front-end Thursday. The bloodletting spilled over into short-dated gilts.
Lagarde requested policymakers avoid criticizing decisions for “several” days, drawing the ire of… well, of policymakers. “Critics” told Reuters that Lagarde’s efforts “stymie their ability to present an honest view of the debate.”
Apparently, policymakers were asked to present only the majority view to the public in the days following ECB decisions (published on Thursdays) and to refrain from voicing “personal” views until the following Monday.
The new guidance wasn’t up for a vote, Reuters said, adding that although “the guidelines are informal” — an expression of Lagarde’s wishes — and policymakers won’t be punished for disobedience, the lag between last week’s policy decision and this week’s hawkish procession suggested officials are complying. For now, anyway.
Or maybe they aren’t complying. Because if they were, we wouldn’t know about the new “guidance” in the first place.
One source who spoke to Reuters (again, at odds with the spirit of Lagarde’s request) noted the obvious: There are now likely to be more leaks, not less. “Do you want leaks? Because this is how you get them,” the person said.
Apparently, Powell this week was not able to convince Lagarde of the benefits of central bankers actually doing very little, but talking quite a lot. Perhaps this will come to be known as the “Powell Pivot” — in which jawboning is not a policy per se, but may be suitable stand-in of last resort when you don’t actually have a policy.