OPINION: Christine Lagarde is 'still learning central banking,' and she showed Thursday that she's a quick learner.
Christine Lagarde passed her first serious test as president of the European Central Bank on Thursday. After chairing the central bank’s governing council, she signalled continuity with the loose monetary policies designed by her predecessor Mario Draghi. But she also indicated that she would stick to her own style of communicating with markets, and confirmed that a “strategic review” of the bank’s mission and policy would take place throughout the course of next year.
Foreign exchange traders who sent the euro EURUSD, +0.3773% slightly up after she talked may have been focused on her indication that the economic headwinds the eurozone is currently facing — from trade war threats to the slowdown of emerging economies — seem “somewhat less pronounced.” But for the time being, the ECB is staying the course.
There are reasons for that. In spite of the massive monetary loosening initiated by Draghi in 2012, the ECB has failed to meet its official inflation target of “below but close to 2%” every year since 2014. The central bank now sees inflation slowly picking up in the years ahead but even the level it would reach in 2022, 1.6%, would hardly qualify as mission accomplished.
The modest, studious approach Lagarde takes to her job will go some way toward bringing peace to the ECB’s debates, as could the strategic review next year which, she said, will “leave no stone unturned.”
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