MacroScope

Walking, talking ECB leading indicator

November 8, 2009

German Bundesbank President Axel Weber is developing a reputation as a leading indicator for the European Central Bank.

In the same way as a pickup in confidence can foreshadow a pickup in the economy, Weber’s comments about the direction of ECB policy this year have tended to be borne out by events.

The ECB’s broad hint on Nov. 5 that it will drop its super-long, one-year loans to euro zone banks next year follows a similar suggestion by Weber a week earlier.

And earlier this year, the 52-year-old publicly argued (and succeeded) for the ECB not to cut its main interest rate below zero, or follow other central banks in adopting a massive asset-buying programme.

Some economists wonder whether Weber – seen along with Italy’s Mario Draghi as an heir apparent to  ECB President Jean-Claude Trichet in 2011– just dares to say publicly what others are already thinking, showing little regard for the unwritten rules that make Trichet the official barometer of ECB opinion.

But others say Weber’s record this year shows he is successful at convincing others to follow his lead. A former academic, he can talk eloquently about the nitty-gritty of economic analysis and as the representative of the euro zone’s biggest economy and banking sector, his opinion carries weight. 

“When Weber speaks, the market does tend to listen,” says Societe Generale economist James Nixon, a former ECB staffer.

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