Lagarde Says ECB Is ‘Determined’ to Deliver on Inflation Mandate
Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.
Christine Lagarde said the European Central Bank will be “resolute” in restoring euro-zone price stability under her presidency, while stressing that an upcoming strategy review will be open-minded.
“The ECB’s accommodative policy stance has been a key driver of domestic demand during the recovery, and that stance remains in place,” she said in the text of opening remarks at the European Parliament for her first testimony in the role.
“It is premature to venture here into debates about the precise scope, direction and timeline of our review, as the matter has not yet been discussed thoroughly by the Governing Council,” she said. “What I can confirm, however, is that the strategy review will be guided by two principles: thorough analysis and an open mind.”
Lagarde acknowledged the side effects of the ECB’s ultra-loose policy -- negative interest rates, quantitative easing and long-term bank loans -- and said the review will try to gain a better understanding of how longer-term trends affect what the central bank can control.
Inflation has yet to return to the goal of just under two per cent despite years of pumping liquidity into the financial system, and the ECB itself has become increasingly concerned that its policies might threaten financial stability.
The new ECB head made only a passing mention of climate change in her opening remarks. The central bank has come under increasing pressure to play a bigger role in that area, though policy makers including Bundesbank President Jens Weidmann have warned against heavy-handed steps such as barring the bonds of polluters from QE, an idea proposed recently by a group of activists and academics in an open letter to Lagarde.
“New challenges have emerged such as demographics, disruptive technology and climate change,” she said. “Conventional wisdom has been challenged and monetary policy globally has explored unchartered territories.”
--With assistance from Catherine Bosley, Lucy Meakin, Brian Swint and Fergal O'Brien.