The new charm offensive of the European Central Bank


The European Central Bank is viewed with skepticism by many citizens. There are different opinions on why this is so. The new ECB President Christine Lagarde believes that the central bank does not understand the purpose of its work in an understandable way, it is too far away from the citizens. Many central bankers, on the other hand, face ignorance. When senior central bank managers explain their actions in public events, the audience sometimes doesn’t know what distinguishes a central bank from a commercial bank. An information offensive is, therefore, an important part of the strategy review that the ECB started in January.

“The ECB is listening” is the title of a series of events by European monetary authorities in all euro countries, at which representatives and civil society organizations – from consumer associations, trade unions, employers’ organizations, students, and representatives of the churches and other social groups – should be heard and discussed with them.

The start is on 26. March in Brussels with Lagarde and ECB chief economist Philip Lane. The debate will be broadcast live on the Internet. Events from the national central banks, including the Bundesbank, are to follow in the weeks after. “We want to listen and be open to the opinions, expectations and concerns of the citizens. Share your ideas with us,” says Lagarde. “All ideas and points of view flow into the strategy review.” There is also a corresponding portal on the Internet.

Isabel Schnabel strengthens the new course

The German, who has been in office since the beginning of the year, is particularly strong ECB director Isabel Schnabel. It wants to promote more understanding among the population and clear up misunderstandings. “If people keep hearing that the ECB is harming them with their policies, it is misleading and endangers trust.”

Lagarde also makes it clear to people in the Eurozone: “Price stability helps them in many areas of life, saving, in credit contracts and investing. ” Overall, the ECB is concerned with a simpler, more understandable language with which to explain its policies.

The entire strategy review – the first for 17 years – will be an extensive process that includes eleven subject areas and will be completed by the end of the year should be. In addition to communication, it is also about climate change, globalization, digitization, productivity and technical progress and their effects on monetary policy. Monetary policy instruments should also be put to the test. “Every stone is turned over,” Lagarde had already said in December a few weeks after taking office.

Is the price driver “ Housing” overlooked?

The question of measuring Show inflation and price stability. Maintaining price stability is the central bank’s main task. The housing factor is currently under-considered, also in the opinion of Bundesbank President Jens Weidmann. The European consumer price index HICP has only a limited 6.5 percent share of rentable accommodation. “The index also includes rents. However, many people live in their own apartments or houses. However, owner-occupied residential property is missing from the shopping basket”, Weidmann points out a problematic point.

If this were taken into account, the inflation rate would have been about 0.2 percentage points higher in the past, says the Bundesbank President. Economists even speak of up to 0.5 points. This could have an impact on the ECB’s monetary policy decisions. Weidmann hopes that the central bank will “get closer to people’s realities of life”.

Economists argue similarly with regard to the factor and price driver for housing. ECB chief economist Lane also believes that this should be given more weight when measuring inflation. For many citizens, the low proportion of rent should be used to calculate the head shake inflation rate. With a share of a third or often more, it is the largest chunk of its expenditure.

And living in your own apartment or house is not for nothing, although the increase in the value of the property should also be taken into account. The subject of housing and inflation is a difficult, albeit important, field when it comes to reviewing strategies and communicating with the outside world. The ECB and national central banks will finally be listening to tenants and homeowners over the next few weeks and months.

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