ECB monetary review could boost policy flexibility
Subject ECB monetary review. Significance The new ECB president wants to extend the bank’s remit to include addressing climate change, but disagreements are mounting over the traditional mission, monetary policy. Christine Lagarde headed her first monetary policy meeting on December 12 and, as expected, stuck to Mario Draghi’s policy path. However, the divisions between Governing Council members who support the ultra-loose stance and those who oppose quantitative easing (QE) and lower interest rates will deepen. Impacts New Executive Board members include Isabel Schnabel and a replacement for Benoit Coeure; they will influence the way the board leans. Lagarde has little banking expertise but will use her political skills to encourage governments to expand fiscal policy. Lagarde wants the ECB to tackle climate change but this is technically challenging and will be opposed in the Governing Council. The ECB's chief economist and the directors general for economics and monetary policy will have more sway under Lagarde.