ECB Insight: Bank of Spain’s Escrivá Again Puts Distance Between Himself and the Doves

17 December 2024

By Marta Vilar – MADRID (Econostream) – Almost three months after his appointment as governor of Banco de España, José Luis Escrivá has reinforced the initial perception that he may not become a card-carrying member of the camp of doves on the European Central Bank Governing Council.

With the benefit in particular of his first major speech on monetary policy on Monday, it is becoming apparent in any case that Escrivá is probably less dovish than his immediate predecessor, Pablo Hernández de Cos.

The first indication that he might not be terribly dovish came during an on-stage conversation at the IIF annual membership meeting in October, when Escrivá surprised some by saying that at its policy meeting the previous week, the Council had ‘concluded that the risks to inflation remain balanced.’

This was the same meeting directly following which ECB President Christine Lagarde had said that there was ‘probably more downside risk than upside risk’ to inflation. The contradiction suggested a desire on Escrivá’s part to distance himself from the dovish camp.

As it turned out, Escrivá was only reporting the facts anyway. As the subsequently released meeting account revealed, his characterisation of the balance of risks to inflation more closely matched the dominant view at the meeting than Lagarde’s more dovish interpretation.

One policy meeting later, Escrivá is again making clear that he is not the most dovish member of the Council. After Lagarde at last Thursday’s press conference limited herself to calling risks to inflation ‘two-sided’, Escrivá didn’t wait long before expressing another view.

‘[W]e could conclude that risks to the inflation baseline scenario are slightly tilted to the upside’, Escrivá said in a speech in Madrid on Monday. ‘A trade war and the uncertainty it brings about is not very different from the disruption of supply chains, and we know perfectly well that this is an inflationary mechanism.’

With less than three months under his belt, these are Escrivá’s only public comments to date on monetary policy.

A priori, it was natural for ECB observers to expect Madrid as the capital of a peripheral member state to send a dovishly inclined policymaker to Frankfurt. Escrivá’s immediate predecessor, Pablo Hernández de Cos, was generally considered a policy dove.

Still, a Bank of Spain insider who spoke to Econostream shortly after Escrivá’s appointment predicted that the new governor would not be consistently dovish or hawkish, but would instead stick largely to the centre, tilting to one side or the other depending on data.

This is the usual definition of being pragmatic, which is how Council members often prefer to see themselves rather than as adherents of a specific monetary policy philosophy. Escrivá may have had a particular reason not to let himself be too easily pigeonholed as a dove.

Weeks before he took office on September 26, Spanish media had been criticising Prime Minister Pedro Sánchez’s move to appoint his minister of digital affairs, formerly minister of Social Security, to head the Bank of Spain, arguing that it put the institution’s independence at risk.

So it was that Spanish daily La Razón pubished an opinion piece on September 4, the day Escrivá was officially appointed, under the title ‘Sánchez takes over the Bank of Spain’.

Like other national central banks, Banco de España regularly assesses the efficacy of government measures. As governor, Escrivá would wind up analysing the impact on Spain’s economy of his own policies, such as the pension reform he implemented as minister of Social Security.

Since his appointment, Escrivá has been visibly focussed on shoring up the bank’s independence, as if to prove the naysayers wrong. Indeed, his first decision was to strengthen the institution’s independence by proposing a modification of the law granting it autonomy.

Against this backdrop, it is not hard to argue that Escrivá has reasons to want to avoid being regarded as the typical monetary policy dove from the periphery. Time will tell where he really stands.