ECB’s Lagarde: Low inflation poses fundamental challenges

Low inflation poses fundamental challenges to the European Central Bank (ECB), President Christine Lagarde said at the ECB and its Watchers Conference hosted by the Institute for Monetary and Financial Stability, in Frankfurt.

Further comments

“Strategy review has yet to be concluded.”

“To underpin inflation expectations, we need to ensure that our aim is perceived to be symmetric by the public.”

“Both policies must remain expansionary for as long as necessary to achieve their respective goals.”

“A persistent failure to meet the inflation aim can feed into inflation expectations and would call for a shorter policy horizon.”

“We need to have a clear consensus – agreed within the governing council and understood by the public – on what tools are available to us when inflation is too low.”

“We need to keep track of broad concepts of inflation, including measures of owner-occupied housing.”

“Measures we have taken since march this year will increase inflation by around 0.8 percentage points cumulatively between 2020 and 2022, and GDP growth by around 1.3 percentage points.”

“Underlying inflation measures are more responsive to economic slack and tend to better predict inflation over the medium term.”

“Make-up strategy can strengthen the capacity of monetary policy to stabilize the economy when faced with the lower bound.”

EUR/USD unfazed

EUR/USD keeps its offered tone intact around 1.1730 after Lagarde’s comments. The spot is down 0.11% on the day.

About President Lagarde

The European Central Bank's President Christine Lagarde, born in 1956 in France, has formerly served as Managing Director of the International Monetary Fund, and minister of finance in France. She began her eight-year term at the helm of the ECB in November 2019. As part of her job in the Governing Council, Lagarde holds press conferences in detailing how the ECB observes the current and future state of the European economy. Her comments may positively or negatively the euro's trend in the short-term. Usually, a hawkish outlook is boosts the euro (bullish), while a dovish one weighs on the common currency(bearish).