Exclusive: Governing Council to Hold Non-Monetary Policy Meeting in February in Lapland

28 October 2022

By David Barwick – FRANKFURT (Econostream) – The European Central Bank is planning a non-monetary policy meeting of the Governing Council in northern Finland in February, Econostream understands.

The meeting will take place in Rovaniemi on February 22, the regional capital of Finland’s northernmost area, Lapland, according to the ECB’s still somewhat tentative thinking. The ECB’s public calendar currently shows the gathering taking place in Frankfurt some three weeks after the previous monetary policy meeting on February 2.

It is possible that, despite the non-monetary policy characterisation of the meeting in Lapland, authorities will use the opportunity to take a deep dive into the ECB’s operational framework and at least lay the groundwork for fundamental decisions.

In that sense, the meeting would follow naturally from the non-monetary policy meeting of the Governing Council in Cyprus on October 5, at which monetary authorities launched a discussion of the full range of policy instruments available to them.

ECB President Christine Lagarde, queried at the press conference following yesterday’s monetary policy meeting about quantitative tightening, said in an apparent reference to the Cyprus meeting that this was ‘a matter that we have discussed at our last retreat amongst ourselves, the governors.’

‘We did not discuss the substantive issues today – deliberately – because we decided on a lot of issues’, she continued. ‘But what we decided is that we would pursue that discussion and we would decide the key principles of the reduction of our APP monetary portfolio in December. So that gives you a bit of an indication of when those key principles will be discussed and decided, and I will be very pleased to inform you about those principles at our next monetary policy meeting in December. And that has to be of course in advance of the decision to implement and to roll out this reduction.’

Even if the ECB is ready for some communication on QT in December, the discussion of reducing its balance sheet, which Lagarde termed ‘the reduction of our APP monetary portfolio’, must at some point be part of a fundamental discussion that one insider recently likened to a 2008 meeting of the US Federal Reserve, at which the Fed reached the decision to shift from the corridor operating system on which it had previously relied to a floor operating system with ample liquidity.

There has not yet been a similarly comprehensive discussion of the ECB’s operating framework, but a formal discussion, preceded by additional analysis and followed by an eventual decision, must ultimately take place, the insider commented.

That eventual decision would involve fine-tuning the ECB’s current framework, which since the financial crisis has in essence – though not explicitly, a circumstance some observers view critically - been a floor system underpinned by liquidity operations and massive asset purchases conducted under various quantitative easing programmes.

Asked about the meeting in Lapland, an ECB spokesman declined to comment.