U.S. President Donald Trump reminds the ECB leadership of a very old, but long suppressed lesson: Monetary policy also has a foreign policy dimension.
The monetary policy of large currency zones always has an international impact. Mario Draghi was harshly reminded of this on Tuesday after his public statement that a loosening of monetary policy would have its effect, not least of all, through the exchange rate. Draghi promptly saw the angry man at the White House level an accusation at him; that the European Central Bank president is pursuing European trade policy at the expense of the United States.
The actual target audience of Donald Trump’s message, however, could likely be the U.S. Federal Reserve, whose leadership is currently discussing its monetary policy, and from whom Trump is loudly demanding interest rate cuts. Trump would also have nothing against a new bond purchase program. But it’s the president of the United States who, with his quickly-changing trade policy, is making a major contribution to the uncertainty in the global economy, which is currently triggering discussions about monetary policy easing in central banks around the world.
The ECB is not alone in this. In the meantime, its leadership can learn a very old but long suppressed, lesson: Monetary policy also has a foreign policy dimension.