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Lagarde seized ECB colleagues’ handsets to prevent leaks

by Mark Mendoza

European Central Bank (ECB) President Christine Lagarde made a bold move this week to address the issue of information leaks from the Governing Council. Lagarde seized the mobile phones of her fellow policymakers during a meeting and chastised them for leaking crucial information prior to policy decisions. This unprecedented step reflects Lagarde’s determination to put an end to the leaking of sensitive information, a problem that has plagued both her presidency and that of her predecessor, Mario Draghi.

The 26 members of the Governing Council were required to hand over their mobile phones at the start of the meeting, just as the decision was being made to appoint Claudia Buch as the ECB’s top banking supervisor. The phones were returned after Buch’s nomination had been announced. The move was prompted by the fact that the media had obtained the name of the current chair, Andrea Enria, before it was officially released in 2018.

This action by Lagarde comes on the heels of Reuters’ exclusive report that the ECB would raise a key inflation forecast, which paved the way for an unexpected interest rate hike. The leak of this information caused many economists and traders to revise their expectations. Lagarde expressed her disapproval of the leak at the beginning of the meeting, and her sentiment was shared by several of her colleagues.

Lagarde inherited a divided Governing Council from Draghi, who had faced criticism for his ultra-easy monetary policy and abrasive management style. Since taking office, Lagarde has made efforts to create a more harmonious atmosphere among policymakers, and many sources acknowledge that she has largely succeeded. Ironically, the high inflation experienced over the past two years has reduced dissent and forced the ECB to raise interest rates.

However, as borrowing costs have increased, more policymakers have expressed reservations about further rate hikes. Lagarde stated that the recent increase in rates was supported by a majority of the governors, in contrast to the unanimous support for the previous hike in July. She emphasized the importance of consensus-building among the Governing Council.

Lagarde has been proactive in building relationships with her colleagues. Shortly after taking office, she held a gathering at a German mountain castle where she pledged to listen more and refrain from preempting decisions before consulting policymakers, as Draghi had been accused of doing. In return, Lagarde asked governors to refrain from criticizing policy decisions publicly and to avoid using their phones during discussions. She also introduced guidelines last year for colleagues to present the majority view after policy decisions and to withhold personal views until the following Monday.

By seizing the mobile phones of her fellow policymakers, Lagarde has taken a bold step to address the issue of information leaks in the ECB. This move demonstrates her determination to maintain confidentiality and foster a more collaborative and unified Governing Council. While some may view her actions as controversial, it is clear that Lagarde is committed to creating a more transparent and accountable central bank.

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