EU leaders rubber stamp Lagarde’s ECB appointment

European Union leaders have approved the appointment of Christine Lagarde as the next president of the European Central Bank. The former International Monetary Fund managing director will replace Mario Draghi, who has served as ECB president since 2011. The European Council had already issued a formal recommendation for Lagarde, and Friday’s move was just a confirmation after the European Parliament and the ECB also supported her. The ECB sets monetary policy for the 19 countries that use the euro currency. Lagarde will take office on Nov. 1 and will serve a non-renewable term of eight years.

European Central Bank minority opposed bond-buying stimulus

 European Central Bank policymakers haggled extensively over several parts of the stimulus package unveiled at their meeting last month, with dissenters objecting to the relaunch of bond purchases aimed at lifting inflation and growth in the 19-country eurozone economy. The written account of the Sept. 12 meeting, released Thursday, backed up recent evidence of an unusual amount of opposition to the decision to pump newly created money into the eurozone — divisions that could be a challenge for incoming ECB head Christine Lagarde. 

The account says that “all members” agreed on the need for some kind of additional stimulus. But “a number of members assessed the case for renewed asset purchases as not sufficiently strong,” according to the account. The dissident members — who were not named in the minutes — were quoted as saying that bond purchases would either be ineffective or should be held back as a last resort. The bank concluded a 2.6 trillion-euro ($2.9 trillion) bond purchase program only in December but decided to re-start purchases amid weakening economic data.

The 25-member governing council in the end decided by a “clear majority” to make bond purchases of 20 billion euros ($22 billion) a month and to cut a key interest benchmark, the rate on deposits the ECB takes from commercial banks, to minus 0.5% from minus 0.4%. The bank also said it would keep rates low indefinitely until inflation is clearly coming back in line with the bank’s goal of just under 2%. Some members pushed for a different wording for the interest rate promise or for an even bigger rate cut but without the bond purchases. Others opposed any rate cut. Central bank stimulus measures have wide-ranging effects on people, governments and companies. Low rates have made it cheaper for companies and governments to borrow, while pushing up the prices of assets such as stocks and real estate. Some observers have expressed concerns that such stimulus, if carried on too long, may inflate asset prices, leading to a painful collapse later on.