No, it did not surprise me that Mario Draghi, President of the European Central Bank (ECB) sounded rather hawkish at the important annual ECB meeting in Sintra (Portugal). His speech could be best interpreted as a clear signal that monetary policy in the Eurozone will soon be less expansionary.

That did not surprise me. Not because of Draghi´s eagerness to tighten monetary policy, but because I can very well imagine that more and more of his colleagues who are part of ECB board are beginning to speak up. It is a public secret that several board members have never been big proponents of the zero-interest rate policy and quantitative easing. Many others did defend these policies, because the economy was barely growing, a recession threat was looming, as well as a secular deflation threat (a declining general price level is to central bankers close to one of the worst possible things that could happen to an economy).

But since the economy of the currency union is growing pretty solidly (since the beginning of 2016 the Eurozone economy has been outperforming the US economy!) and the deflation threat has been wearing off according to Draghi himself, an increasing number of ECB members are starting to think that the central bank should gradually move toward somewhat of a normal monetary policy or should at least suggest that they will be moving in that direction. Do not misunderstand me: a very large majority has absolutely no desire to normalize monetary policy, but wants to make it a bit less expansionary, especially out of fear of what could happen when monetary policy remains loose in a situation of rising inflation and fairly positive economic growth. It could be, after all, the case that the ECB´s credibility, the most important asset of a central bank, becomes subject to public debate.

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