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ECB may reduce frequency of policy meets

LiveMint logoLiveMint 20-05-2014 Bloomberg

Frankfurt: The European Central Bank (ECB) is considering holding its meetings to set interest rates every six weeks instead of monthly, according to three people familiar with the discussions.

Extending the period between monetary policy decisions could help the ECB to agree and publish minutes before the next rate-setting session, the people said, asking not to be identified because the plans are still being discussed. The timetable echoes that of the US Federal Reserve, which has eight scheduled meetings a year and publishes an account three weeks later.

ECB president Mario Draghi signaled last month that he wants to reduce the frequency of rate decisions and increase the transparency of the process to curb speculation over policy makers’ plans.

The Frankfurt-based institution is trying to hone its communication strategy while guiding the 18-nation euro area through a gradual recovery against the backdrop of a prolonged period of low inflation.

“It’s very clear that the frequency of our meetings leads the public and the market to expect action,” Draghi said on 24 April in Amsterdam.

“Together with the publication of the minutes and with the need to avoid triggering short-term market noise, I think the governing council may consider to reflect on the frequency.”

An ECB spokesman declined to comment on the schedule for meetings or plans for publishing the minutes.

The people didn’t say when the ECB will decide on a revised schedule. Der Spiegel reported on 18 May that the central bank could cut the number of interest-rate meetings to as few as three per year.

Minutes publication

The 24-member governing council, comprising the six-person executive board and the heads of the euro area’s 18 central banks, is the ECB’s decision-making body. It currently meets near the start of each month to set monetary policy. The next rate decision is on 5 June in Frankfurt.

Any reduction in the number of monetary policy meetings would potentially allow more time for the Governing Council to discuss other topics. The central bank heads already gather in Frankfurt mid-month for decisions on matters other than interest rates. Their workload will increase from November, when the ECB becomes the single supervisor for euro-area lenders.

Reducing the frequency would allow more time to review and agree on the minutes of the monetary decisions, a document that would help steer market expectations ahead of the next meeting.

BOE schedule

Policy makers must decide on the format for the minutes, with Draghi saying last month that he favours avoiding attributing positions to individual policy makers, which would expose them to external pressures, perceived or real. Two euro-region central-bank officials said in March that the central bank has started drafting trial minutes.

The Swiss National Bank meets four times a year, while the Bank of England, like the ECB, meets monthly.

Andrew Haldane, who will become the BOE’s chief economist on 1 June, said last month that it may be a good time to look at whether UK policy makers are gathering too often.

“Is monthly, therefore, the right periodicity?” Haldane told British lawmakers on 30 April. “I am not sure. We know that other central banks often operate on a lower frequency.”

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