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Lagarde plans to ‘turn over every stone’ with ECB review

New European Central Bank chief Christine Lagarde set out details of a comprehensive review of the ECB's activities pointing to the changes underway across the 19-member eurozone since the last examination of its policy and instruments 16 years ago.

Berlin, 12 December 2019 (dpa/MIA) – New European Central Bank chief Christine Lagarde set out details of a comprehensive review of the ECB’s activities pointing to the changes underway across the 19-member eurozone since the last examination of its policy and instruments 16 years ago.

The review would “turn over every stone” Lagarde told a press conference in Frankfurt after chairing her first meeting of the ECB’s 25-head rate–setting council since taking over from Mario Draghi six weeks ago as ECB president.

Price stability as represented by the ECB’s annual inflation target of just below 2 per cent would be at the “core and centre” of the strategic review, said the former International Monetary Fund head and fourth ECB president since the bank was founded in 1998.

Lagarde said the review would be launched in January and could run to the end of the year. It would also include an examination of issues such as global warming, technological change as well as inequality in society.

She said the review, which would draw on an input from a wide range of groups such as politicians, academics as well as ordinary citizens, would also “take stock” of the results that the bank’s instruments have delivered.

The ECB also planned to set up a working group to consider the prospects of introducing a digital currency in the 19-member eurozone, Lagarde said.

A former French finance minister, Lagarde was speaking after the ECB left borrowing costs at historic lows on Thursday, holding its refinancing rate at zero and maintaining the bond-buying scheme launched by Draghi at 20 billion euros (22.3 billion dollars) per month.

She said rates “would remain at their present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to” the bank’s inflation target of just below 2 per cent.

Lagarde told reporters that she was neither a hawk nor a dove when it came to monetary policy. “I see myself as an owl,” she said, adding that she hopes to bring to the job a bit of wisdom.

The ECB’s first woman head also warned ECB-watchers against drawing too many comparisons between her presidency and her predecessors and warned them against any tendency to “over interpret or second guess” her remarks.

“I have my own style,” she said. “I’m going to be myself and probably different. When I don’t know, I will tell you I don’t know,” Lagarde candidly told reporters.

Economists gave her good reviews for her performance on Thursday as Madame Euro. Commerzbank chief economist Joerg Kraemer described it as “the Lagarde charm offensive.”

The 63-year-old Lagarde has also moved into the executive suite at the ECB’s Frankfurt headquarters as the euro’s new chief custodian against the backdrop of the uncertainties facing the global economy.

Britain’s Brexit battle is set to move into a new phase following Thursday’s election in the nation.

Meanwhile, US President Donald Trump is considering imposing a new round of tariffs on a batch of Chinese goods on Sunday as part of his protracted trade war with Beijing, which has hit the global manufacturing sector.

But Lagarde said the ECB detected some positive signs emerging in the economy, saying that while incoming data pointed to inflationary pressures remaining muted but with “some initial signs of stabilisation in the (economic) growth slowdown.”

Still, she said the ECB had downgraded its 2020 economic growth forecast for the eurozone with its so-called staff projections showing the currency bloc expanding by 1.1 per cent next year – down from the September forecast of 1.2 per cent. The economy should then pick up speed to 1.4 per cent in both 2021 and 2022.

Inflation is expected to edge up to 1.6 per cent in 2022, rising to 1.7 per cent in the fourth quarter of the year, consequently taking consumer prices closer to the ECB’s annual inflation target.

“It is directionally good,” said Lagarde, but she added it was still not consistent with the bank’s goal of price stability. Annual inflation should come in at 1.1 per cent next year and 1.4 per cent in 2021, she said.

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