European Central Bank launches review that will redefine its mission and tools

24 Janvier, 2020, 13:51 | Auteur: Auguste Feret
  • Euro May Fall as the ECB Stays Cautious Despite Economic Upturn

European Central Bank rate-setters did not make any policy change on Thursday, simply standing by their pledge to keep buying bonds and, if needed, cut interest rates until price growth in the euro zone heads back to their goal.

The IMF said last week it expects euro area GDP to grow by just 1.3% this year, behind other advanced economies like the United States and UK.

Christian Sewing, chief executive of Deutsche Bank, told an audience at the World Economic Forum in Davos that the ECB had missed an opportunity to reclaim room for monetary policy manoeuvre, given that trade tensions between the U.S. and China are easing and the risk of a no-deal Brexit has been averted.

"Moderate growth reflects the ongoing weakness of worldwide trade in the environment of continued global weakness, which has particularly affected the euro area manufacturing sector and dampened investment growth", Lagarde said.

Lagarde was expected to provide more details about the scope of the review at her second news conference as the central bank's chief from 1330 GMT.

The ECB said in a statement that interest rates would remain "at their present or lower levels" until inflation starts climbing towards its 2% target.

The euro hovered around $1.1085, against the US dollar on Thursday after the ECB's announcement. It also said it sees its asset-purchase program running for as long as necessary and to end shortly before any rate increase.

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"Governments with fiscal space should be ready to act".

Lagarde said she saw a similar determination to take climate action in the European Commission, among "many of the euro area leaders" and increasingly in the private sector.

Lagarde said that aim will now be reviewed, along with the ECB's toolkit, how it measures price growth and how it communicates with the public.

The central bank on Thursday launched a review of its strategy, the first since 2003.

"We are going to review a whole host of issues", Lagarde said.

Investors will be looking for clues to whether the review will see Lagarde cement Draghi's legacy of monetary largesse, or if she will use it to heed worries that years of easy credit have fueled financial bubbles.

"I'm not a despotic president of the Governing Council", Lagarde said.

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