New ECB chief Christine Lagarde holds rates steady
Christine Lagarde has a message for investors and the media: She’s going to do things her own way as president of the European Central Bank.
“I will have my own style,” she told reporters on Thursday. “Don’t over-interpret, don’t second guess, don’t cross reference. I am going to be myself and therefore probably different.”
This declaration came as Lagarde presided over her first monetary policy decision as president of the central bank.
As expected, the ECB said it would hold interest rates steady, while pledging to continue purchases of €20 billion ($22.3 billion) in financial assets per month for “as long as necessary.”
With policy on hold, attention centered on Lagarde, who took the reins from predecessor Mario Draghi in November after serving as head of the International Monetary Fund.
Lagarde made clear she intends to rise above recent divisions at the central bank, which has faced unprecedented internal dissent following the decision under Draghi in September to restart the stimulus taps. More hawkish members of the bank’s governing council did not think that the economy was weak enough to merit that move.
“I’m neither a dove nor a hawk,” Lagarde said. “My ambition is to be this owl.” Owls, she noted, are “associated with a little bit of wisdom.”
Analysts have pointed out that Lagarde, who is a lawyer by training and not an economist, brings with her a political savvy that could come in handy. Lagarde was French finance minister during the global financial crisis, and forged deep connections in global finance during her time at the International Monetary Fund.
With interest rates at historic lows, concerns are mounting about how much ammunition central banks have left in their arsenals. That means Lagarde may need to increase pressure on euro zone governments to step up fiscal spending down the line.
Europe’s economy is showing signs of stabilization but still needs support, according to Lagarde.
The ECB now expects Europe’s economy to grow by 1.2% in 2019, an upgrade from an earlier forecast of 1.1%. For 2020, it’s expecting growth of 1.1%, a downgrade from 1.2%.
“Incoming economic data and survey information, while remaining weak overall, point to some stabilization in the slowdown in economic growth in the euro area,” Lagarde said. She noted that risks “remain titled to the downside but have become somewhat less pronounced.”
The trade negotiations between the United States and China are heading in a better direction, and there will be more clarity on what’s happening with Brexit after Thursday’s UK election, Lagarde said.
One of Lagarde’s biggest tasks will be completing a top-down review of the central bank’s strategy within the next year. She indicated on Thursday that the bank will scrutinize the tools it’s used to juice the economy in the past decade and consider new ones. The review will also examine the impact of climate change and inequality.