Francesco Canepa and Balazs Koranyi

FRANKFURT, (Reuters) – Christine Lagarde, President of the European Central Bank, has asked national central bank chiefs to have more say at policy meetings. She also requested that her board speak less and allow for more debate, according to sources who were familiar with the matter.

Lagarde has told chief economist Philip Lane and fellow board member Isabel Schnabel to limit their presentations and leave more space for the central bank chiefs of the euro’s 19 countries to air their views, six sources told Reuters.

It has been difficult for Frankfurt’s central bank to reach consensus across different nations. Lagarde is not the only one complaining about the organization of meetings where some voices tend to dominate.

Since last summer’s inflationary pressures were underestimated by Lane and his staff, such criticism has grown. The ECB’s policymakers cautioned that the price rise was not temporary and pushed the central bank to adjust its stance to allow higher interest rates for this year.

According to sources, Lagarde decided that board members’ presentations should be limited to 20 pages. She also instructed staff to finish seminars before noon on the first day at the ECB policy meeting.

Sources said that in addition to the above, the second-day policy meeting is now held on Wednesday morning, rather than Tuesday afternoon. The Thursday session starts 30 minutes earlier, with the intention of allowing for more debate.

Changes that were previously not disclosed had already been in place at the April 14, 2015 meeting.

A spokesperson for the ECB stated, “We now provide more thorough analysis in supporting documentation prior to meeting so that presentations are more concise to avoid repetition.” “By starting meetings earlier, the Governing Council has given itself more time to reach a shared assessment of the economic outlook and take collective monetary policy decisions.”

Lane is the person responsible for economic forecasts at the ECB and author of policy recommendations. His presentations and propositions are the main focus of the policy meetings. These include a Wednesday dinner attended by six ECB board member members and national bank chiefs.

Some of Lane’s presentation were over 60 pages long before the modifications. Three sources say this left little room for discussion.

Three sources confirmed that Schnabel is also subject to the directive. Schnabel is the board’s other member and heads market operations at the ECB. Her presentations tend to be short on the topic of financing conditions.

Lane, who had the meeting structure from Mario Draghi’s predecessor, was now sending briefing materials before meetings to governors. This frees up time to allow others to speak.

For this article, he declined to comment.

According to a variety of projections from the public and private sectors, the inflation rate in the euro area is now nearly four times that set by the ECB and could not drop below 2% for many years.

Some policymakers warned publicly that prices could rise faster than predicted by the ECB. They also disputed Lane’s assertion that record-breaking price jumps would be averted without taking tougher actions. Lane didn’t pay enough attention to some of the differing views, said some policymakers privately.

One source said that Philip has an overpowering voice and it was important to balance this out. Due to sensitive nature of the subject, none of the sources wanted to be identified.

Lane, as well as all other ECB policymakers that have made public statements have acknowledged the fact that inflation is likely to remain high at least through next year. Therefore rate increases are possible.

JOACHIM?

According to one source, Lagarde summoned Joachim Nagel, chief of Bundesbank, in early debates, to discuss what was a potential change of approach for the April policy meeting. However, Nagel hadn’t yet shown up to request to speak.

Nagel began his new job in January. Since then, he has called repeatedly on the ECB for a reduction of stimulus and a rise in rates. This is because the high level inflation at 7.5% was at serious risk.

Sources said Lagarde had said “I think Joachim wanted a to say something,” one source stated.

Although the ECB acknowledged its mistakes in the inflation projections, it also noted the errors of other eurozone forecasters. These errors were caused by errors in the “conditioning assumptions”, especially for energy prices.

Other central banks, including the U.S. Federal Reserve Bank and Bank of England, have not been able to anticipate the recent price spike that was fueled by successive waves of Russia’s invasion of Ukraine and coronavirus. But both banks were faster to recognize that inflation may not be as short-term as one had expected.

The bank was forced to pivot because of errors in its forecasts by the ECB. Lagarde initially stated that a rate increase this year was unlikely and then, just months later, he confirmed expectations that a mid-year move would be possible.

Sources said that some sources claimed that policymakers have leaked details from policy meetings because they were frustrated by the abrupt switch in gears at the bank and the style of discussion during policy meetings.

Sources said, “Christine Lagarde is annoyed by the leaks. This is yet another step towards trying to stop them.”

Lagarde promised to be more inclusive in policy-making after Draghi’s turbulent final months. Many policymakers had voiced opposition to Draghi’s decisions.

This commitment is evident in her decision to restructure the meetings.

The ECB is closer to the Fed’s practices by reducing the time it takes for presentations.