03 October 2003

EZA 558: ECB-Monetary

Trichet to boost ECB pragmatisem; Issing M3 concerns overplayed
After ratification by the European Parliament, the way is clear for the European Union Summit to endorse Banque de France Governor Jean-Claude Trichet to take over as European Central Bank president on Nov. 1. Trichet's views were laid out recenty to the EP's Economic and Monetary Affairs Committee in a highly polished public performance that demonstrated one of the main differences with current president Wim Duisenberg. We expect Trichet to bring a more multi-national character to the ECB (EZA rpt 543/03Jun2). It is not before time. Board member Otmar Issing's concerns over money supply growth, most recently expressed on Wednesday in Zurich, need, in our view, to be countered by a broadly pragmatic board with significant political and economic presence. Despite the continuing strong growth of euro M3, clients should not give too much weight to Issing's remarks, certainly overplayed in the press. Not only is euro broad money growth showing signs of slowing as equities markets pick up, but Issing's more hawkish approach will, we expect, be quickly overtaken by a euro/dollar rise, perhaps as high as $1.25 by year end.

SummaryTrichet confirmation by EP means broader, more pragmatic ECB board consensus coming, to balance German focus on money

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© Graham Bishop