The ECB chief economist made calls to banks
Back in March when ECB President Christine Lagarde said the central bank "is not here to close spreads" after unveiling a smaller-than-hoped stimulus package, the market responded by dumping Italian debt and shares.
Shortly afterwards, chief economist Phillip Lane placed separate calls to 11 banks and investors in which he sought to clarify the message, according to the WSJ.
That same day, Mr. Lane held teleconferences with 11 banks and investors including BlackRock, JPMorgan and UniCredit. In a blog posted on the ECB's website the following morning, Mr. Lane signaled that the bank was indeed ready to buy Italian government bonds if necessary.
Six days later the ECB unveiled a €750 billion bond buying program.
Anyone who bought the dip in Italian bonds made big gains.
In another similar incident, the euro rose after the Sept 10 ECB meeting but later the same day Lane called 8 major banks. Then the following day he released a cautious note on Europe's economic recovery, saying there was "no room for complacency" and leaving the door open for fresh stimulus.
To me, this is absolutely shocking. It's a scandal and an embarrassment.
"You don't just pick up the phone and talk to the select few," said Panicos Demetriades, a former member of the ECB's rate-setting committee as head of Cyprus's central bank. "Talking only to the big players is what you're not supposed to be doing as the central bank. It's not helpful for relations with the public."
