ECB Said to Weigh Fed-Style Meeting Schedule on PolicyJeff Black, Alessandro Speciale and Stefan Riecher
The European Central Bank is considering holding its meetings to set interest rates every six weeks instead of monthly, according to four people familiar with the discussions.
Extending the period between monetary policy decisions could help the ECB to agree on 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 U.S. 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 April 24 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 May 18 that the central bank could cut the number of interest-rate meetings to as few as three per year.
The 24-member Governing Council, comprising the 6-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 June 5 in Frankfurt.
The central bank heads also 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.
The Governing Council could continue with such regular meetings every two weeks, and use the extra gathering within the six-week cycle to focus on supervisory matters, according to two people familiar with the matter.
Reducing the frequency of monetary-policy decisions would allow more time to review and agree on the minutes of the sessions, a document that would help steer market expectations ahead of the next meeting.
“If they publish minutes it makes sense to reduce the frequency of the meetings as it takes some time to prepare the records,” said Christian Schulz, senior economist at Berenberg Bank in London. “I’m not convinced it will change much for market volatility. Investors might instead just increase their focus on speeches by policy makers and other available information.”
The ECB must decide on the format for the minutes, with Draghi saying last month that he favors avoiding attributing positions to individuals, 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 June 1, said last month that it may be a “a good time” to look at whether U.K. policy makers are gathering too often.
“Is monthly, therefore, the right periodicity?” Haldane told British lawmakers on April 30. “I am not sure. We know that other central banks often operate on a lower frequency.”