ECB President Lagarde’s Introductory Press Conference Statement

January 23, 2020

The ECB Governing Council’s first policy meeting of 2020 ended as expected with no change in its interest rate structure, including a negative 0.5% deposit rate since a 10-basis point cut last September. The Bank will continue quantitative stimulus of EUR 20 billion per month and, as previously announced by President Lagarde, is beginning a long broad review of monetary policy strategy that will occupy much of this year. Forward guidance on interest rates affirmed that they will “remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.” Regarding the program of asset purchases, officials expect such to “run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.”

Lagarde’s introductory statement read at the subsequent press conference expands on the conclusion “that an ample degree of monetary accommodation is still necessary for the continued robust convergence of inflation to levels that are below, but close to, 2% over the medium term.” The recently installed new president of the European Central Bank also spoke about the coming full review of the ECB’s objective, which will be the first such comprehensive examination of policy strategy in 17 years. In her predecessor’s eight years at the helm, CPI inflation averaged only 1.2% per annum, significantly and almost constantly below the goal. The review will explore how to better meet its objective and whether to redefine the goal in a more symmetrical fashion as other central banks have done.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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