NEW YORK--(BUSINESS WIRE)--As favourable macro conditions in the Eurozone spark a vibrant debate on the timing of the European Central Bank’s (ECB) turn towards monetary policy tightening, major changes in the Bank’s key personnel are imminent. Four of the six-member Executive Board will be replaced in 2018-2019, and one more early in 2020. This window coincides just about perfectly with the economic cycle. Europe is becoming ripe for monetary policy normalisation -- more conventional interest rates (as compared to negative deposit rates) and divestment from the expansive quantitative easing (QE) program.
“Doves,” who have been in place on the ECB Executive Board since the crisis period, have served the loose monetary policy framework of recent years well. These policies were critical to stabilising the financial markets and helping beleaguered economies rebuild. As the bloc’s macro conditions are increasingly suitable for a tightening stance, the possible changing of the guard towards a significantly more “hawkish” tone does raise eyebrows about the durability of the Eurozone’s economic recovery. Credit growth remains lacklustre and inflation persists at below target rates. This commentary discusses these imminent staffing changes and the macro backdrop on the bloc.
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