Not a hawk or dove but ‘an owl’: Christine Lagarde holds rates at first meeting
Christine Lagarde has begun her rein at the European Central Bank (ECB) with a promise not to be a hawk, nor a dove, but an owl, “associated with a little bit of wisdom”.
The pledge came as the ECB kept interest rates on hold at record lows and downgraded its 2020 growth forecast for the Eurozone to its lowest since 2014.
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At her first policy meeting as president, Lagarde said the ECB expects the Eurozone to grow 1.2 per cent this year and 1.1 per cent in 2020.
The new predictions mean growth for 2019 has been upgraded from a forecast of 1.1 per cent made in September. Yet it marks a downgrade in 2020 from a previous 1.2 per cent prediction, signalling that the Eurozone’s weak run is not over.
After the monetary policy decision, Lagarde said that the “the ongoing weakness of international trade… continues to weigh on the euro area manufacturing sector”.
In a press conference featuring a few rhetorical flourishes, she called on governments to do their bit to boost the Eurozone. “It takes many to dance the economic ballet that would deliver on price stability and growth,” she said.
The ECB said its main deposit rate will stay at minus 0.5 per cent, meaning lenders are charged for stashing their money at the Bank in an effort to force them to make loans.
Lagarde said: “The governing council reiterated the need for monetary policy to remain highly accommodative for a prolonged period of time.”
Lagarde’s decision to hold a steady course contrasted with Draghi, who in his first meeting in 2011 slashed rates to tackle the Eurozone crisis.
Her decision will no doubt have been influenced by recent divisions among the ECB board over policy. Some members, particularly from northern Europe, have criticised ultra-low interest rates for squeezing bank profits and hurting savers.
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Along with its interest rate decision, the ECB announced it would keep buying bonds at a rate of €20bn (£17bn) a month in a bid to stimulate the Eurozone economy.
Lagarde said: “The governing council expects them to run for as long as necessary to reinforce the accommodative impact of its policy rates.”