Axel who? ECB gets tough without hardman Weber

March 3, 2011

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When it decided the time was right to crack down on inflation, the European Central Bank did so without the man who is often regarded as its toughest inflation hawk: Bundesbank chief Axel Weber.  The ECB took financial markets by surprise by announcing on Thursday it could raise rates as soon as April — a decision its policymakers reached without Weber even in the room.

The German, who has appeared isolated at times over the last year because of his staunch commitment to price stability above all else, was absent without leave and did not attend the meeting.

“He’s tied up today,” a spokesman for the Bundesbank said of Weber, who last month announced he would step down from the central bank a year before his term ended and that he was no longer a candidate to head the ECB when Trichet’s term expires in October. Weber said his hardline views were not well received by other decision makers.

The ECB’s decision to flag a rate hike took markets completely unawares.

“The position of the Governing Council is that an increase in interest rates at the next meeting is possible,” Trichet said in his matter-of-fact style, sending the euro soaring.

Weber made a splash last May when the lone ranger came out swinging against the ECB’s decision to start buying government bonds – seen as a breach of protocol in the sanguine central bank which prides itself on unanimity in its decisions.

Even though the ECB looks more hawkish than anyone expected, it is unfortunately too late for Weber to throw his hat back in the ring for the presidency.

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