Draghi pivotal as Lagarde/ECB maintains easy monetary policy

Draghi is again central to Euroarea fortunes though in a different role as PM of Italy.

Mario Draghi, Italian prime minister, is emerging as Europe’s pivotal politician days ahead of a crucial European Central Bank meeting likely to extend the monetary legacy he laid down as its president in 2011-19.

European statistics compiled by OMFIF show evidence of sharply rising producer prices across the euro area, by as much as 8% year-on-year (Figure 1). Although there are only limited signs of this feeding into permanently higher costs for consumers, much increased energy and other input prices, exacerbated by bottlenecks (Figures 2-4), complicate the ECB’s monetary policy-setting at the 10 June meeting of its governing council.

Despite worries about a worldwide rise in inflation fuelled by the US recovery and President Joe Biden’s massive stimulus, the minority on the ECB council favouring a gradual shift to monetary normalisation shows little appetite for a showdown on Thursday.

Political uncertainty in Germany and France ahead of elections in September and April, coupled with the probability that Draghi will remain Italy’s prime minister until 2023, is highlighting the 73-year-old technocrat’s key position.


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