Carsten Brzeski, chief economist at ING, points out that during her first appearance at the European Parliament as ECB president, Christine Lagarde left no doubts that the ECB will soon announce the start of the first strategic review since 2003.
“Reading between the lines and also taking into account Isabel Schnabel’s comments at her hearing at the European Parliament this week, it appears that the ECB will want to start this review as broadly as possible and without any limits. In our view, it is very likely that Lagarde will announce the start of this review at next week’s ECB meeting. This is the first ECB policy meeting since Lagarde came into office.”
“With the experience of 2003 in mind and current (and new) challenges for central banks in a low growth, low inflation and negative interest rate environment, we expect the ECB’s review to eventually focus on four main issues: the definition of price stability, how to interpret the mandate, and including climate change as well as communication.”
“All in all, the ECB is preparing for the start of a new review of its monetary policy strategy.”
“Our current guess is that expectations should not be set too high. A change of the price stability definition to “around 2%”, garnered with some incorporation of climate change and more communication transparency looks like a possible outcome. However, before any of these conclusions materialize many stones will have to be turned.”
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