Thursday

22nd Feb 2024

ECB set to become more transparent

  • "It is just the beginning" says Draghi about proposed plans to make ECB decision-making more transparent (Photo: World Economic Forum)

The European Central Bank kept its main interest rate at a historic low of 0.5 percent Thursday (1 August) and indicated that in future the reasoning behind such decisions will be made public.

ECB chief Mario Draghi said the bank "thought it would be wise to have richer communication" with the public.

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A proposal is to be put forward in autumn, said Draghi, noting that the main stumbling bloc is to make sure that the central bankers' independence is not compromised.

Opponents of more transparency for the eurozone's central bank say that the national bankers - who are meant to represent the euro area as a whole - will be subject to domestic political pressure.

Draghi, who corrected himself when he used the term "minutes", said that the ECB members "have to be at ease with what will be produced."

"I think this communication should give an account of rationale of why certain decisions have been taken, or why they have not been taken."

He refused to go into more detail about the proposal saying "it is just the beginning" and amid implied criticism about the ECB's relative opaqueness said all central banks have "changed their communication" over the years.

Among other central banks, the ECB is one of the very few that do not publish minutes of its meetings. Current rules mean they are published 30 years after rate decisions are taken. Other banks, such as the Bank of England or the US Federal Reserve, publish their minutes with a time lag of some weeks.

On the eurozone, Draghi suggested that economic indicators showed that it had come through the worst of the crisis.

He also indicated that the low interest rate is to be kept in place for the foreseeable future using "forward guidance" language, first introduced at a press conference last month.

The move is a bid to signal to markets that the ECB will keep rates slow enough to spur economic growth, amid tentative signs of economic recovery.

Asked to compare the situation to this time last year, when the eurozone was in the throes of the crisis, Draghi said: "All in all the picture seems to be better from all angles than it was a year ago."

Draghi said that looking beyond the game-changing promise he made a year ago to do "whatever it takes" to save the euro, single currency states had made "significant" progress in policy implementation over the 12 months.

He singled out reform efforts undertaken in bail out countries Greece, Ireland and Portugal and noted the labour market reforms in Spain.

"Look at the results," he said. "If you look at structural improvements, all across the board I don't think you can find a country which hasn't improved."

"Look at current account surpluses - the actual figures are quite impressive ... you have strong increases in exports, not just in Germany but in Spain and Italy."

He suggested that the more stabilised state of finance markets was not only due his famous pledge last summer, but to these reforms.

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