The announcement by the President of the European Central Bank, Jean-Claude Trichet, that interest rates would be raised at the next meeting of the bank’s Governing Council on December 1st,could be a defining moment in his presidency.
By pre-announcing the rate increase, which senior ECB officials call a move towards greater transparency, Trichet firmly demonstrated his leadership of the Governing Council. Press leaks by dissident members had sowed confusion in the public’s mind as to the bank’s concerns and intentions before the announcement.
Even though a consensus had emerged in the Council that a December interest rate hike would be necessary, a handful of holdouts on the ECB Governing Council – some with their own very private agendas – leaked misleading and, in one instance, clearly false information to the press in a futile attempt to thwart the increase.
In an anonymous leak to a major financial news service, an ECB official falsely maintained that unanimity was needed for a rate hike, implying a single dove could stop it. Infuriated by what he considered to be guerilla tactics, Trichet effectively silenced the mischief-makers by the bold stroke of pre-announcing the rate hike two weeks before the meeting.