Some ECB Officials Pushed for More Optimistic Economic View

Some European Central Bank officials wanted President Christine Lagarde to take a more optimistic view on the economy in her remarks following the Governing Council’s meeting on Thursday, according to people familiar with the discussion.

Those officials suggested describing the recovery so far from the pandemic-induced recession as a bit better than anticipated, the people said. The final statement said the euro-area’s economic performance has been “broadly in line with previous expectations.”

France’s Francois Villeroy de Galhau was particularly upbeat about the outlook for his economy, said the people, who asked not to be identified because the deliberations were confidential.

Spokesmen for the ECB and Bank of France declined to comment.

The Governing Council’s discussion took place in the context of mixed signals on the economy. Some of the most recent data are pointing to a slowdown after a strong rebound following the end of lockdowns. Yet the ECB’s updated projections on Thursday show this year’s slump will be less severe than it forecast just three months ago.

Lagarde noted in her press conference that the latest projections don’t include the full effect of the European Union’s 750 billion-euro ($891 billion) recovery fund, and that will “clearly have an impact.”

Policy makers already disagreed at July’s meeting over language about the economy in the introductory statement. At that time, several asked to include a line expressing confidence in the forecasts that had been compiled a month earlier. Lagarde’s statement then ultimately said that incoming data signaled “a resumption of euro-area economic activity.”

Adding to the challenges in predicting the outlook this time is the stronger euro. The single currency has risen more than 10% since March, adding downward pressure to inflation and undermining exporters’ competitiveness.

While Lagarde addressed the exchange rate when speaking to reporters, she adopted weaker language than during the last major bout of currency gains in 2018, when Mario Draghi was president.

The ECB will “carefully assess incoming information, including developments in the exchange rate, with regard to its implications for the medium-term inflation outlook,” she said.

©2020 Bloomberg L.P.

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