Tag Archives: Jean Claude Trichet

Trichet says Goodbye and SMP peaks at 173 bn. €

Today marks the last day of Jean-Claude Trichet’s tenure as president of the European Central Bank. Bild am Sonntag interviews him on the occasion. In terms of being the main person responsible for the ECB’s mandate of price stability, he has been a success. The inflation measure used by the ECB has moved quite closely around the value which after some introductory opaqueness is stated as close to, but not above, 2%. Surely, during the peaks of the financial crises there were upward and downward swings, but on average you would not call Trichet a man that leaves a bank with little anti-inflation credibility. What he does leave is a … Continue reading

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ECB buys public debt again: Otmar Issing voices strong critique

In a rare Sunday press release (August 7) , the President of the ECB, Jean-Claude Trichet (on behalf of the Governing Council), hailed the fiscal and structural measures of Spain and Italy and their commitments—along with other member countries—to strictly adhere to “fiscal targets”. Then he emphasized that countries are sovereign states that themselves should honor their own “signature as a key element in ensuring financial stability in the euro area as a whole“. (Oh, and he supports the joint statement of the same day by France and Germany, which is not surprising given the occasional word-by-word similarities.) Then he concludes that the Securities Markets Programme (SMP) will be activated. … Continue reading

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Steady as she goes: The ECB keeps policy rate unchanged again

After having raised the key policy interest rate in April (from 1 to 1.25 %), the ECB kept it unchanged on June 9, thus repeating their “non-action” of May. This is a somewhat bold and perhaps unconventional move by a central bank whose overriding legal mandate is price stability. Given their own definition of price stability as meaning an annual Euro-wide HICP-inflation rate not above 2%, you would have thought that the increase in April would have been followed by further increases. After all, HICP-inflation is currently above 2.5%, and unemployment is falling slightly (continuing the downward adjustment, which I have argued earlier could have been the trigger for the … Continue reading

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Unemployment goes down and ECB raises policy rate

Today, the ECB raised its policy rate by 0.25 percentage point to 1.25%. This came hardly as a surprise, given the various statements from ECB officials in recent weeks. Many commentators have motivated this by the increasing HICP inflation. However, I would argue that there are other just as applicable, if not better, reasons. Namely that economic activity is picking up, and unemployment is crawling down. Indeed, in the press release following the rate increase, Governor Trichet states Let me now explain our assessment in greater detail, starting with the economic analysis. Following the 0.3% quarter-on-quarter increase in euro area real GDP in the fourth quarter of 2010, recent statistical … Continue reading

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ECB, SMP, ETC. Who pays for what?

After the financial crisis hit in 2008, new acronyms have been appearing at a rapid pace around the globe. These mainly describe the various measures taken by the world’s central banks to offset the troubles caused by the crisis. Many took the form of liquidity provisions to aid “frozen” banking markets. The European Central Bank launched on May 14, 2010 a so-called Securities Market Programme (SMP), under which it – temporarily – allows itself to purchase Euro denominated government bonds. In its decision, the ECB motivated the move by “ . . . in view of the current exceptional circumstances in financial markets, characterised by severe tensions in certain market … Continue reading

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No Weber after Trichet: Politics 1, Treaty 0

Jean-Claude Trichet steps down as President of the European Central Bank this October. So much is certain, if things go according to the statutes of the ECB. Things do not necessarily go according to the statutes, but it seems a certain bet that Trichet will step down as planned. A question of much concern is who will succeed him? There has been much speculation that the next President would have to come from Germany. (A common conclusion derived from the hypothesis that the Germans and French battle over ECB leadership and influence, with the first President Duisenberg, a Dutch promising to step down after a half term, being a compromise … Continue reading

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