ECB’s De Cos Defends Draghi Over Report QE Advice Ignored

(Bloomberg) --

European Central Bank policy maker Pablo Hernandez de Cos said a report that President Mario Draghi ignored internal advice on quantitative easing was a “misinterpretation” of how the institution works.

The comments by the Spanish central banker echo those made earlier Thursday by Olli Rehn, his Finnish colleague on the ECB’s Governing Council. Both came out in defense of Draghi after a Financial Times report said the president ignored advice from the monetary policy committee -- the internal group of officials who examine policy options -- when he decided to relaunch asset purchases last month.

Hernandez de Cos said it’s inaccurate to imply that the final monetary policy decision made by Draghi and the other members of the Governing Council must be in line with the recommendations from committees.

“There are some aspects of the FT report that, in my view, very clearly show a misinterpretation of the internal work of the technical committees of the ECB and their role in the workflow,” he said in response to questions from Bloomberg about the latest twist in the ongoing dispute over the September stimulus package.

The ECB cut interest rates further below zero last month and, controversially, relaunched QE. About a third of the 25-member Governing Council opposed the move, with some saying it wasn’t warranted by the euro-area economic outlook. The criticism -- unusual for how publicly it has been aired -- comes as Draghi nears his final days at the top of the ECB. Rehn said Thursday he expects incoming president Christine Lagarde, who starts on Nov. 1, to work on “team building” given the divisions.

An account of the Sept. 11-12 meeting published Thursday highlighted how far apart policy makers were on the elements of the stimulus package. Some were ready to back an even deeper cut in interest rates in exchange for dropping the proposal to restart bond purchases. Others needed convincing about reducing rates at all.

Hernandez de Cos said assessments from the ECB committees are “one of the many inputs” considered by the Governing Council.

“The internal work from the committees feeds the governing bodies, therefore it is not strange or uncommon at all that at the end of the process the decision and conclusions achieved by the decision makers depart from the views expressed in the internal discussions of the committees,” he said.

To contact the reporter on this story: Jeannette Neumann in Madrid at jneumann25@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Paul Gordon

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