It used to be that the European Central Bank was hailed for its transparency. Traders and other market participants certainly appreciated the fact that they could read over the subtle – yet straightforward – commentary of President Jean Claude Trichet at his monthly public addresses and be able to discount the next policy decision with some degree of accuracy. How things have changed.
Just a week ago, the head of the ECB asked policy members to refrain from stating their forecasts for monetary ahead of the impending rate decision. This request was more-or-less respected; but now that the meeting has passed (with a significant shift in policy stance), central bankers are once again airing their disagreements. This morning, council member Marko Kranjec suggested the ECB would likely increase its asset purchase program and broaden its definition of acceptable collateral. In direct contrast, Axel Weber repeated his belief that the central bank should put a floor under the benchmark lending rate at 1.00 percent and that the current 60 billion euro collateral bond purchase was the more than sufficient to support the markets. This tension will only add to uncertainty and speculation surrounding the euro; so we will keep an eye on the news wires.