ECB Insight: As the Quiet Period Looms, ‘Torschlusspanik’ Sets In

9 October 2024

By David Barwick – FRANKFURT (Econostream) – On a day like today, that so very German word Torschlusspanik might come to mind. Literally ‘gate-closing panic’, it refers to the fear of letting an important opportunity slip by at the last minute and is often used in the context of those worried that their marriageability is on the verge of expiration.

For us it could equally apply to Wednesday’s rush by European Central Bank Governing Council members to make public their views concerning an October rate cut before the quiet period starts tomorrow and effectively condemns them to silence until after the monetary policy meeting on Thursday of next week.

So it is that in addition to a fresh batch of thoughts from a number of policymakers who have been anything but quiet lately (and whose latest comments were all in line with their previous ones and generally supportive of a cut), we have also heard from others who had been more reticent recently.

The latter include National Bank of Belgium Governor Pierre Wunsch, Bank of Greece Governor Yannis Stournaras, Central Bank of Cyprus Governor Christodoulos Patsalides and National Bank of Slovakia Governor Peter Kažimír.

Stournaras was, unsurprisingly, open to further easing next week, as he told the FT in an interview. Indeed, the paper reported him as already deeming a further cut in December appropriate, and to have characterised interest rates even after two such 25bp reductions as ‘still in highly restrictive territory’.

Patsalides seemed to want to sound nuanced in an interview with the Cyprus News Agency, allowing that while feeble activity and weak inflation appeared to leave ‘room for a reduction in interest rates’, nevertheless ‘all new data should be discussed as usual’ and ‘any implications of developments in the Middle East should be assessed.’

We don’t think Patsalides is dogmatically dovish, and he is said to have backed the ECB’s ‘insurance hike’ a year ago, well before he became a Governing Council member.

But like Stournaras, Patsalides was on the list of Council members Econostream published on 26 September who, as we assessed, ‘would probably arrive in a frame of mind conducive to cutting’ if the relevant meeting were taking place then. With respect to Patsalides, we see nothing to think that this does not remain valid today.

It is no surprise that Kažimír told reporters in Bratislava on Wednesday that he was 'not completely convinced that we should make decisions based on one good number'. Besides being normally hawkish in any case, following the September meeting Kažimír had probably placed his bet too firmly on the no-cut-in-October option to be in any rush to reconsider now.

'We will almost surely need to wait until December for a clearer picture before making our next move', he wrote in a blog back on 16 September.

He would evidently still prefer to wait until December, but we have a hard time believing that this would have much if any impact on deliberations.

Then there is Wunsch, who was naturally not on our list, and whose comments today in an interview with Belgian business daily L’Echo make clear why.

Refusing to accept an October rate cut as a fait accompli, Wunsch enumerated his various reservations and suggested that the case for easing next week would be difficult to make.

Thoughtful as always, he highlighted the contradiction of cutting rates based in large part on an energy-driven decline in inflation just as energy prices were suddenly spiking anew – a subject that, as observed here yesterday, had left policymakers oddly unmoved. That is, until Wunsch.

Our assumption is that Wunsch will not be among those backing an October cut, but will instead cast his lot with the handful of Council members who regard such a move sceptically.

While his arguments may help persuade colleagues who could tilt either way, such as Eesti Pank Governor Madis Müller, our reading is that the likely number of opponents of a cut remains too small for these to win the day. Unless, of course, something else happens between now and 17 October.