Money managers and economists have offered their opinion on the nomination of Christine Lagarde as the European Central Bank’s (ECB) new president, noting her gravitas on the international stage but her lack of experience on monetary policy.
Euro zone bond yields tumbled on the news, and defensive stocks rallied Wednesday morning as investors staked bets that the incoming head of the ECB will be a fan of low interest rates.
Several market watchers have offered their take on the Lagarde appointment, with her lack of knowledge on monetary policy proving to be a recurring concern. In a note to clients Wednesday, Jim Reid of Deutsche Bank said Lagarde carried a “credibility risk” given her inexperience with the ECB’s complicated array of tools designed to encourage stable economic growth.
Reid said market participants would like her political skills and connections but suggested the central bank’s chief economist Philip Lane would now be expected to carry out the “intellectual economic legwork.”
Mark Haefele, who acts as chief investment officer at UBS Global Wealth Management, noted in his morning note to clients that Lagarde would be the first ECB president ever without any experience in monetary policy.
Haefele said he still considered the IMF chief a “qualified candidate” but that her appointment didn’t overly make Europe a more attractive place to invest.
Berenberg’s Holger Schmieding said Wednesday that Lagarde had “proved her mettle” in her French finance ministerial role and had displayed her ability to work well with Germany during the early days of the euro zone debt crisis.
Schmieding also highlighted that Lagarde’s power in the role shouldn’t be overestimated and that it was the 25-member ECB Governing Council that took key decisions on monetary policy and not solely the president.
Pictet’s Frederik Ducrozet issued a note Wednesday that focused squarely on the positive aspects of Lagarde’s nomination.
The strategist said her experience, gravitas and a likely continuation of Draghi’s dovish stance should stand her in good stead among lawmakers and the investment community. Ducrozet also noted that Lagarde had always been supportive of the ECB’s unconventional policies, including Outright Monetary Transactions (OMT) and quantitative easing (QE).
If Europe’s top job nominations turn into appointments, then women will occupy the two top positions of ECB president and head of the European Commission.