NEW YORK (Reuters) - The European Central Bank’s chief economist Philip Lane played down divisions at the institution on Friday after the shock resignation of a fellow board member earlier in the week in contrast with the ECB’s ultra-aggressive stimulus policy.
Sabine Lautenschlaeger, a German who had criticized the ECB’s easy-money policy under Mario Draghi, said on Wednesday she would quit the central bank after finding herself “in a situation in which this is the best course of action”.
She was one of just a third of the 25 members of the Governing Council who had dissented with a decision to resume bond purchases as part of an easing package that also included a rate cut and a pledge to keep money cheap for a long time.
Lane did not mention Lautenschlaeger but he acknowledged “differences of view” among ECB policymakers on issues such as the massive purchase of government bonds - something that he found “perfectly reasonable”.
“What is true that on individual elements of what we do there are differences of view,” he told a Reuters event in New York. “Some of it are structural about the role of sovereign bond purchases in monetary policy, others are technical.”
He added there was “a very high degree of consensus” on the need to ease policy and that talk of “deep divisions” was exaggerated.
Earlier on Friday, Bundesbank President Jens Weidmann, who had also expressed his opposition to the new bond purchases on Sept 12, said that he found the rate cut appropriate.
Lane also defended two elements of the package that have raised eyebrows on the market: the tiered system of interest rates and a new series of cheap multi-year loans to banks known as Targeted Long-Term Refinancing Operations (TLTRO).
The first TLTRO auction received few bids, a disappointment for the ECB that had portrayed the facility as a powerful tool to keep credit flowing to the economy.
But Lane had not given up hope.
“We expect a significant TLTRO take up over time,” he said.
This would also be crucial to offset some tightening in inter-bank rates, particularly in Italy, since the ECB announced it would tier its deposit rate, currently set at -0.5%, from Oct. 30.
The tiering system will exempt banks from paying the ECB a charge on their idle cash on a portion of their excess reserves.
This had fueled expectations that banks will trade their reserves to profit from the tiered system, effectively reducing the amount of cash available on the money markets.
Lane took note of this “minor issue” but did not expect this to jeopardize the pass-through of the ECB’s policy stance.
“In the grand scheme of things this is a minor issue,” he said. “There is complete pass-through.”
Additional Reporting by Dan Burns; Writing by Francesco Canepa in Frankfurt; Editing by Alison Williams