Central bankers have argued fiercely about the future course

For the first time in her tenure, Christine Lagarde had to settle serious disagreements between the monetary authorities. Board members were divided over the future course.

As reported, the European Central Bank decided on the outlook for new interest rates at its board meeting last Thursday. This basically indicates to the financial markets that key interest rates will remain unchanged or even lower in the coming years. The review became necessary because the European Central Bank recently set a new 2% inflation target. Accordingly, the outlook had to be adapted to the new guidelines.

People familiar with the discussions said the original proposal for the new version met objections from nearly half of the monetary authorities. It took a few rounds of drafting to get the critics involved. “The first proposal would have gotten the majority, but just barely,” said one insider. This is far from unanimous.”

It was an unusual situation for the monetary authorities. Because board proposals rarely change at a board meeting. In addition, monetary policy expectations were already up for discussion weeks before the interest rate meeting. Some changes have been made. Among other things, a clip mentioning inflation of “at least 2%” was deleted. There were concerns that the central bank might intentionally aim to exceed its inflation target.