ECB Watch: Farewell to the chief
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ECB Watch: Farewell to the chief

Otmar Issing has been the most impressive advocate of the ECB. What happens now that the bank has lost its implicit third pillar in monetary policy?

Otmar Issing, the European Central Bank
Issing: faced down criticisms

On May 31, Otmar Issing, the European Central Bank’s first chief economist and the sole remaining founding member of its executive board, left his office in Frankfurt’s Eurotower for the last time. Architect and overseer of the ECB’s monetary policy strategy, he had come to the end of his fixed, non-renewable, eight-year term. A strong proponent of central bank openness and communication, some three weeks earlier Issing had submitted himself for the eighth time to an annual inquisition – unique among central banks – by outside observers: The ECB and its Watchers series of conferences, which he himself had initiated in 1979. All day he listens to and responds to presentations by academic and market economists and by central bankers from outside the euro zone, who challenge and probe aspects of the ECB’s monetary policy performance and its twin-pillar strategy – in which analysis of the monetary data is used as a cross-check on its analysis of economic data – and also debate related topics such as the implications of fiscal policy and EU enlargement.

Each year Issing has faced down, with eloquent but rigorous argument, criticisms that he likens to those of Goldilocks: some say the role of money in the ECB’s policy strategy is too large, others that it is too small, that the price stability objective in terms of inflation is set too low or that it is set too high, that policy has been too tight or too lax, while he concludes that it is “just right”.

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