Lagarde pledges own style as she unveils broad ECB review
December 12 2019 05:55 PM
New European Central Bank (ECB) President Christine Lagarde addresses a news conference
New European Central Bank (ECB) President Christine Lagarde addresses a news conference

Reuters/Frankfurt

* Policy unchanged
* ‘My style’ for communication, Lagarde promises
* Review to be open-ended, due by end-2020
* Growth for 2020 slightly downgraded to 1.1%


Christine Lagarde used her first full news conference as head of the European Central Bank on Thursday to promise a broad and open-ended strategic review of the bank's workings and served notice of a new style in communicating its thinking.

After ECB policymakers earlier left its easy money stance unchanged as expected, Lagarde tackled head-on the keen anticipation in markets and media about how she would follow on from predecessor Mario Draghi, a technocrat who was hailed as one of the world's best communicators of monetary policy.

‘I will have my own style. Don't over-interpret, don't second-guess, don't cross-reference. I am going to be myself and therefore probably different,’ she told reporters in what she billed as a short preamble before taking questions.

‘You are not the only audience,’ Lagarde told the assembled ECB press corps, saying she would use different, non-technical language to take the bank's message to broader audiences.

She went on to announce that a planned review of how the ECB does business would aim to conclude by the end of next year and draw from a wide range of voices, including those from civil society and academia.

‘It will aim not just preaching the gospel we think we master but also listening ... There is no preconceived landing zone at this point in time,’ she added of the exercise, which mirrors a similar endeavour under way in the United States.

US Federal Reserve chief Jerome Powell has also struck a much more consumer-friendly tone since taking over last year.

Lagarde confirmed that the review would weigh fundamental issues including how technology and climate change affect policy, as well as addressing inequalities which she said ‘are certainly rising’ in developed economies.

DOVE, HAWK ... OWL

Financial analysts see the ECB on hold throughout next year, a view that was strengthened by the Fed signalling on Wednesday that it was unlikely to touch US interest rates in 2020.

Former International Monetary Fund chief Lagarde's first policy decision did nothing to dispel those expectations.

The ECB held its deposit rate at a record low minus 0.5% while keeping the option of another rate cut firmly on the table. It also promised low interest rates for an extended period and kept the pace of bond purchases, aimed at lowering borrowing costs, steady at 20 billion euros a month.

With several ECB board members having made public their discomfort with the latest stimulus measures announced by Draghi in September, Lagarde stressed her goal was to seek consensus.

‘Once and for all, I am neither a dove nor a hawk. My ambition is to be this owl that is often associated with a little bit of wisdom,’ she said.

Lagarde also unveiled slightly tweaked economic projections for the euro zone, with growth next year revised down to 1.1 percent from an earlier forecast of 1.2 percent, while inflation in the same year was put at 1.1 percent, still well below the ECB's target of almost 2%.

For 2022, growth was put at 1.4 percent and inflation at 1.6 percent in initial projections. Lagarde said the staff forecasts, which foresaw inflation at 1.7 % in the final quarter of 2022, were heading the right way but still fell short of the ECB's inflation target of just under 2%.

‘It is certainly directionally good. But is it the aim that we pursue? No.’




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