Mario Draghi, the president of the European Central Bank, is scheduled to host a regular news conference on monetary policy on Thursday. If the event progresses as it normally does, he will start by reading out a numbers-heavy statement composed by the council that sets policy.
Then, things could get interesting.
After the statement, Mr. Draghi usually takes questions from reporters – and at that point he is free to speak in an unscripted way. Investors have in recent years come to expect big things when Mr. Draghi talks freely. With utterances that seem ad-libbed – but almost certainly aren’t – the central banker has sent markets soaring and raised hopes for Europe’s economic outlook.
The uncut method of communication is unusual for a central banker.
Central banks can create virtually unlimited amounts of monetary stimulus. Perhaps in recognition of that awesome power, the people who form central bank policies broadcast their boldest goals in painstakingly scripted ways. The Federal Reserve’s releases on monetary policy, for instance, sometimes read as if they were written by a committee that obsessed over every word. And Janet L. Yellen, the chairwoman of the Fed, has not used her unscripted sessions to drop big policy bombshells.
Yet on three occasions since 2012, Mr. Draghi has made crucial remarks that appeared to catch some of his colleagues at the European Central Bank by surprise. By speaking this way, Mr. Draghi has undermined the position of policy makers at the central bank who oppose his bolder policies, including Jens Weidmann, the head of Germany’s powerful central bank.
A Reuters report this week detailed what may be the most recent example.
The European Central Bank announced in September that it was going to start buying bonds in a bid to rev up Europe’s economy. According to the report, certain members of the European Central Bank’s governing council did not want to signal publicly the amount of bonds that the institution was thinking of buying. In the E.C.B.’s Sept. 4 statement, Mr. Draghi merely said that the purchases would have a “sizable impact” on the central bank’s balance sheet. (When a central bank buys bonds, it holds them on its balance sheet).
A reporter asked Mr. Draghi to quantify what “sizable” meant. He replied that the aim was to have the balance sheet increase “toward the dimensions it used to have at the beginning of 2012.” That implied an increase of around 1 trillion euros. According to Reuters, the specificity angered certain members of the council.
Even so, Mr. Draghi had managed to communicate that the bond purchases would not be small, perhaps evading his opponents.
Some two weeks earlier, Mr. Draghi was at a conference for central bankers in Jackson Hole, Wyo. In a relatively wonky speech on unemployment, he made something of a detour to address the falling inflation numbers in Europe.
Declining prices, known as deflation, are a concern for central banks because they can deepen an economic malaise. And in his speech, Mr. Draghi committed the central bank to strong action to counter it. “The governing council will acknowledge these developments and within its mandate will use all the available instruments needed to ensure price stability over the medium term,” he said.
The remarks on inflation were added at a late stage, according to a note on the central bank’s website that reads: “The text has been updated to reflect new comments on inflation made during delivery.”
The late addition spoke of internal divisions, according to some economists.
“Though he revises staff speech drafts until the last minute, he may fear hostile leaks of text,” said Richard Portes, professor of economics at the London Business School. “And he may want to lead from the front, and commit the E.C.B. publicly in a way that foreseeable internal opposition will find it hard to reverse.”
The remarks from Mr. Draghi that have so far been the most powerful were also delivered in a seemingly unexpected fashion. In 2012, when fears were growing that the euro might not survive, he used an occasion in London to say, “Within our mandate, the E.C.B. is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
The speech was freewheeling in style, at one point likening the euro to a bumblebee. Perhaps indicating that it was not carefully vetted beforehand, the central bank’s website says of the speech: “Verbatim of the remarks made by Mario Draghi.”
The big question, however, is how long Mr. Draghi can continue with this approach to communication. In theory, it could undermine the important process of bringing dissenting members of the governing council along with the majority. His opponents may resort to their own unconventional communication tactics if they believe Mr. Draghi is gaining an advantage with his. A messy public fight could then weaken the standing of the central bank.
But the dissenters may be few. And Mr. Draghi may be making the arresting utterances merely to amplify where the majority of the central bank policy makers intend to go. Sometimes a consensus is impossible to grind out.
“The dissenters will have to accept that the data reject their policies and then themselves propose alternatives,” Mr. Portes said. “I am sure Draghi will listen if others come up with policies that could reverse inflation expectations and bring the rate back toward 2 percent.”