Could the European Central Bank be learning a thing or two about managing the message? Ahead of Thursday’s interest rate-setting meeting, when policymakers will want to do nothing more than say “we’re holding steady”, it looks like the bank may come up with an eye-catching announcement to give everyone something to write about.
That something is the long-running and vexed question of why the bank that loves to tell you how transparent it is (well, at certain times, once you’ve cleared security and as long as you understand no quotes should be used from this conversation) keeps the minutes of its governing council meetings secret for 30 years. The practice makes it an outlier – the Federal Reserve, Bank of England and Bank of Japan all publish minutes of their monetary policy meetings within a month of the meeting that they cover.
The excuse at the ECB has always been that members of the governing council, formed of 17 national central bank governors and six executive board members, have to act in the interests of the eurozone as a bloc and not just on behalf of the countries they hail from. Minutes showing who voted for what could make life very difficult back home for the national central bank governors, in particular.
So, after cropping up every now again as a subject worthy of debate, the bank has said it is looking into it and… nothing has happened. Until this week, when two executive board members, Benoît Cœuré and Jörg Asmussen, stuck their heads above the parapet to say they really thought it was time that these minutes were published and hang the consequences.
And then on Wednesday morning Mario Draghi, the ECB president, ditched long-running ambivalence on the subject to tell Germany’s Süddeutsche Zeitung: “I consider it a necessary next step. That is why the ECB directorate will present a proposal on this to the governing council for discussion and decision”.
So what’s going on over at the ECB? Well, the publication of minutes could be a useful corollary to the “forward guidance” policy that the bank launched this month. Under forward guidance, it has dropped another long-standing practice – never “pre-committing” to interest rates decisions – in order to promise to keep interest rates at or below their current record lows for “an extended period of time”.
Here’s one view from Mark Wall at Deutsche Bank (emphasis ours):
The fact this push has emerged in the last month says something about how the executive board feels the forward guidance regime could be reinforced. It would only be worth publishing minutes if doing so currently were to complement the recently implemented forward guidance regime. Were there a surprisingly large group arguing against rate cuts, it would be detrimental to what forward guidance hopes to achieve.
The publication of minutes would continue the ECB’s trend towards ‘rhetorical’ policies – OMT, negative deposit rates, forward guidance. It is easier for Draghi to get a consensus (even unanimous support) behind rhetoric. Actual policy decisions appear to be more challenging.
Now of course even if Mr Draghi proposes the publication of minutes at the meeting this Thursday, there is no guarantee that he will win over the governing council this month.
But even if he does not, it gives the ECB chief something to discuss at his press conference after, in all likelihood, the council decides to keep interest rates on hold.
There is unlikely to be a majority seeking a rate cut, with the purchasing managers indices pointing to a stabilisation last week, backed up by the first, very gentle, sign of improving unemployment numbers on Wednesday. But nor is any of the news so good that the ECB would want to turn overly hawkish and start raising rates, particularly so soon after implementing forward guidance.
Which would leave the ECB press corps dancing around the question of what exactly an “extended period” is – a topic Mr Draghi ducked after the last meeting, only for his fellow board members to sow confusion with accidental misinterpretations of what he said.
Now if only we had something new to announce that is a radical break from the past but does not actually change anything about our monetary policy stance? You can almost hear the thought process.