Frankfurt a.M.Of these, two favoured a cut by 0.5 percentage points to 0.25 per cent, the others preferred a quarter-point cut to 0.5 per cent. One member argued in favour of a rate hike, one in favour of unchanged rates. Guest speaker Nout Wellink expressed concern that the ECB was taking on too many tasks, which, while making the institution ever more powerful, was threatening its political independence.
No resumption of growth expected in 2013
After a decline of 0.5 per cent in 2012 members on average expect a stagnating economy in 2013. The change compared to a month ago is due to a change in membership. Inflation is expected to fall slightly below two per cent next year.
Shadow Council macroeconomic forecasts
(Forecast means in %, previous forecasts in brackets)
|2012||2.5 (2.5)||-0,5 (-0.5)|
|2013||1.9 (1.9)||0.0 (-0.1)|
Contributors: M. Annunziata, M. Balmaseda; E. Bartsch; S. Broyer; J. Cailloux; J. Callow; E. Chaney, M. Diron, J. Krämer, E. Nielsen, J.-M. Six
Lower rates needed
A large majority favoured a cut of the main refinancing rate, which the ECB last lowered to 0.75 per cent in July. While the expectations are limited that this would give a boost to the faltering economy directly, most members would expect it to contribute to a lower external value of the euro and also to improve the financial situation of banks, and in particular of banks which have to rely most heavily on ECB funding.
One member favoured unchanged rates on the premise that a rate cut would not be effective in stimulating the economy and might even hurt the economy by depressing the income of savers. This member considers credit quantity far more important than interest rates. One member argued in favour of raising rates on the grounds that unanticipated side effects of very low interest rates for a very long time would outweigh limited positive effects on the economy.
Support for the ECB’s willingness to take on new tasks
Guest-speaker Nout Wellink, former president of the Dutch National Bank, expressed concerns about the fiscal-policy roles that the ECB is increasingly taking on. He mentioned the purchases of government bonds, membership in the “Troika”, which is negotiating and evaluating reform programs with crisis countries and the planned role of the ECB as supreme banking supervision authority. In his view, there is a problem with lack of democratic control and a heightened risk that the ECB will lose its political independence by doing things that it can only do in close cooperation with governments and other political institutions.
Many on the Shadow ECB Council shared Wellink concerns. However, a majority supported the course of the ECB during the crisis, arguing that the need to prevent a meltdown of the currency union left no viable alternative for the ECB to take on such tasks.
Change in membership
Gustav Horn, Scientific Director of IMK Institute left the Shadow Council. He was replaced by Sylvain Broyer, Euro Area Chief Economist of Natixis.
Members’ individual votes:
|José Alzola||The Observatory Group||cut 0.25%|
|Marco Annunziata||General Electric||cut 0.5%|
|Manuel Balmaseda||CEMEX||cut 0.25%|
|Elga Bartsch||Morgan Stanley||cut 0.25%|
|Andrew Bosomworth||Pimco||cut 0.25%|
|Sylvain Broyer||Natixis||cut 0,25|
|Jacques Cailloux||Nomura||cut 0.5%|
|Julian Callow||Barclays Capital||cut 0,25|
|Eric Chaney||Axa||cut 0.25%|
|Janet Henry||HSBC||cut 0.25%|
|Merijn Knibbe||Wageningen University||cut 0.25%|
|Jörg Krämer||Commerzbank||hike 0,25%|
|Erik Nielsen||Unicredit||cut 0.25%|
|Jean-Michel Six||Standard & Poor's||Cut 0,25%|
|Richard Werner||University Southampton||unchanged|
Frankfurt, 3 December, 2012
Non-voting Chair of the Shadow ECB Council