CEO Lagarde

++ Steady as she goes until the Strategic Review is complete. Watch Philip Lane for monetary cues ++

  • “I’m neither a dove nor a hawk. My ambition is to be this owl”
    • She will start in neutral. Consult widely.
    • But when she takes the decision, she will have picked a side
    • A company ultimately lives or dies by the wisdom of its CEO
  • A montonous, careful reading of the official statement gave way to an unscripted flash of the real Christine, as she took several minutes to say she was new, so don’t compare her to others. “Don’t second guess me”.
    • A nice get-out-of-jail free card in case she had accidentally moved the market
  • She moved on to the ECB Strategic Review. Like a CEO, she’s coming in fresh, talking to everyone, “listening”, and then making the decision she wants to make
    • Expect a few months of little in the way of guidance, but when the decision comes, she will implement it with extreme prejudice
  • Chief Economist Philip Lane will be the voice she listens to the most
    • She pointed to him a number of times
    • He will provide the intellectual argument for the direction she takes
    • Lane is her Clarida
  • She also warned not to rank her against others. She’s aware of the criticism that she’s not an economist. So, hey presto, in the first few answers tumbled out a wave of statistics, about the TLTRO, the inflation forecasts in each quarter and so on.
    • She is a master of her brief.
  • A number of times she warned the assembled journalists, “You’re not the only audience”.
    • She wants to speak to the common man.
  • She’s capable of political waffley diplomacy, but extreme clarity also
    • Japanification isn’t in the cards at all
    • Negative interest rates worked but there are side effects
    • Output gap “we more often get it wrong than right
  • She claimed she wasn’t going to pronounce on the US/China Phase One trade deal but then said it looked to be taking a more positive tone
    • She will be unable to shy away from the comfortable territory of supranational political announcements
    • She will become the de facto Head of the Eurozone
    • Await Trump Tweets – no doubt he will give her a nickname
  • Overall:
    • hints of Carney in terms of her political tone
    • hints of Powell in relying on her economists
    • hints of Draghi in her encouragement of fiscal policy
  • But her natural tendency to be the CEO could lead her into hot water.
    • Leadership is always required at central banks, and a strong executive usually leads to better results than not.
    • But we haven’t had a strong leader who lacks their own economic ideology.
    • Lagarde’s agnosticism could lead to pragmatism, but it will also leave her rudderless, without a guiding principle, at a time of crisis

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