ECB Hawk-Dove Ranking: Wunsch Formally Enters Hawkish Territory

17 November, 2021

By David Barwick – FRANKFURT (Econostream) – Econostream’s ranking of the members of the European Central Bank Governing Council in terms of hawkishness/dovishness has been updated in light of our recent interview with National Bank of Belgium Governor Pierre Wunsch.

As we wrote here two months ago, we have considered Wunsch to be under review, being unsure that the revision we applied to his ranking end-April – taking him in the hawkish direction while leaving him just barely in the dovish camp - was sufficient.

Since that revision, Wunsch joined with Bundesbank President Jens Weidmann in opposition to the July 22 change to the ECB’s forward guidance on interest rates, but we wanted to see more clearly how he would position himself in the changing macro environment.

Based on our opportunity on Friday to familiarise ourselves with his thinking, it is evident that Wunsch is full of policy-relevant doubts. These were clearly more a matter of conscience than ideology, so that we can imagine that under other circumstances, he would raise equally tough but important questions that would cast him in a dovish light.

Wunsch himself told us on Friday that ‘it’s a bit more complex than putting people into camps.’

‘To the extent there are camps, they seem to be stable’, he said. ‘And in a way I’m being perceived as someone who changed camps, but there are not so many of them. So yes, in a way I was very dovish and I’m becoming more hawkish, but it’s really because the theory says we should try this, we’ve been faced with negative shocks, so let’s give it a try. But if we fall below 2% on a durable basis, let’s admit we’ve got a problem.’

Under the current circumstances, it seems inescapable that Wunsch will find himself siding with those we and other observers generally consider to be monetary policy hawks. As such, we have revised him one full point from -0.25 (marginally dovish) to 0.75 (moderately hawkish).

While we prefer to avoid revisions of such magnitude, it is a consequence of being careful not to make hasty changes. In this case, it also reflects our effort to maintain a proper balance between Council members.

In particular, a slightly smaller revision of Wunsch’ ranking to 0.5 would have left him on a par with Slovenia’s Boštjan Vasle, Slovakia’s Peter Kažimír, Executive Board member Isabel Schnabel and Lithuania’s Gediminas Šimkus. And although this is not an exact science (as we are always ready to point out), Wunsch seems a bit more hawkish than the average of those four of his colleagues.

As always, we will continue to observe him and all the Governing Council members and seek to rank them appropriately. For the moment, no changes are currently envisioned other than the need in a few weeks’ time to assign a ranking to whoever succeeds the departing Weidmann.