FRANKFURT, May 18 ― European Central Bank President Christine Lagarde has given national central bank chiefs a bigger say in policy meetings, asking her own board to speak less and set aside more time for debate, sources familiar with the process said.
Such criticism has grown since last summer as Lane and his staff repeatedly underestimated the size and duration of inflationary pressures. The surge in prices, which some ECB policymakers warned were persistent, eventually prompted the central bank to change tack and open the door to higher interest rates this year.
As the person who oversees economic forecasts and the author of policy recommendations at the ECB, Lane's presentations and proposals are the centre piece of its policy meetings, which include an informal dinner this evening attended by the national bank chiefs and the six ECB board members. Lane, who had inherited the meeting structure from his predecessor under Mario Draghi's presidency, has recently been sending briefing materials to governors ahead of meetings, freeing time for others to speak.Inflation in the euro zone is currently nearly four times the ECB's target and may not fall back below 2 per cent for years, according to a host of public and private sector projections.
Lane and all other ECB policymakers who have spoken in public have now recognised that high inflation was here to stay at least until next year and rate hikes are likely needed.In what one source saw as a possible change of approach at the April policy meeting, Lagarde called on Bundesbank chief Joachim Nagel in the early exchanges of the debate, even though Nagel had not yet appeared to ask to speak.
The errors in the ECB's forecasts forced the bank into an unprecedented policy pivot, with Lagarde first saying that a rate hike this year is highly unlikely, then just months later cementing expectations for a move around mid-year.
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