ECB Hawk-Dove Ranking: Knot Ranked Notably Less Hawkish, Rehn Replaced by Välimäki

28 July 2023

By David Barwick – FRANKFURT (Econostream) – Econostream has updated our hawk-dove ranking to take into account the passage of the last monetary policy meeting, so that the columns indicating voting status include only future meetings – as of today, 14 September, 26 October and 14 December.

In addition, we have re-ranked a full eight members of the Council and made one replacement.

The re-rankings are generally minor tweaks and mostly in the direction of classifying those affected as more dovish (or less hawkish, as the case may be).

The only re-ranking we specifically wish to draw attention to is that of De Nederlandsche Bank President Klaas Knot, to whom we have assigned a ranking of 1.5, corresponding to very hawkish. This compares with his previous score of 2.0, at the extreme hawkish end of the scale.

Most recently, Knot was the lone Council hawk to explicitly cast doubt on a September rate hike, saying on 18 July that ‘[f]or anything beyond July, it would at most be a possibility, but by no means a certainty.’

That was no slip of the tongue, accompanied as it was by the advice that ‘from July onward, I think we have to carefully watch what the data tells us on the distribution of risks surrounding the baseline.’

‘This balance of risk is gradually shifting, and also the risks of perhaps doing too much needs to be paid more attention to’, he said.

Ahead of the 15 June Governing Council meeting, we already noted that Knot, as we said then, ‘sounded markedly less hawkish than in the recent past, reassuring that the worst of inflation had passed, rejoicing at monetary tightening’s initial impact on the real economy, and arguing that financial stability risks warranted proceeding with further rate hikes cautiously.’

At least as far as public rhetoric goes, which is the primary basis for our hawk-dove ranking, we thus find it hard to maintain a ranking for Knot at the hawkish extreme of the scale, and think the change from 2.0 to 1.5 adequately reflects the shift we seem to be witnessing.

We have also replaced Bank of Finland Governor Olli Rehn, on leave whilst running in Finland’s 2024 presidential election, with Board member Tuomas Välimäki. As the Finnish central bank announced on 21 June, Rehn ‘is appointing Member of the Bank of Finland Board Tuomas Välimäki to this position, with full voting rights.’

There is thus no reason for the time being to include Rehn in the ranking, and every reason to include Välimäki. We have assigned Välimäki the same mildly hawkish ranking that had been Rehn’s.