ECB’s Lagarde: We face a global environment that is marked by uncertainty

Dhwani Mehta FXStreet

While delivering a key note address at the European Banking Congress, in Frankfurt, on Friday, the new European Central Bank (ECB) President Lagarde said: “We face a global environment that is marked by uncertainty”.

Two main challenges in the global economy today, the first relates to the changing nature of world trade.

There are also changes of a more structural nature.

We have a common interest in maintaining sufficient levels of public investment.

Europe needs to innovate and invest to respond to these challenges.

Monetary policy could achieve its goal faster and with fewer side effects if other policies were supporting growth alongside it.

High rates of trade growth that we are used to seeing are no longer an absolute certainty.

Second challenge relates to domestic growth in advanced economies.

Monetary policy will continue to support the economy and respond to future risks in line with our price stability mandate. We will continuously monitor side effects of our policies.

If internal demand is too weak and inflation too low, such rebalancing across countries obviously becomes harder.

Stronger domestic demand puts economies in better position to withstand swings.

The resilience of services is the key reason why employment has not yet been affected by the global manufacturing slowdown.

Accommodative policy stance has been a key driver of domestic demand during the recovery, and that stance remains in place.

Answer lies in converting the world’s second largest economy into one that makes full use of Europe’s potential to unleash higher rates of domestic demand.

Monetary policy will continue to support the economy and respond to future risks in line with our price stability mandate.

About ECB’s 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.

FX Implications

The EUR's reaction to the mixed German PMI data was limited, as markets weigh in the recent comments from the new ECB Chief Lagarde on the monetary policy. EUR/USD is back to its familiar trading range around 1.1070, having reversed a knee-jerk spike to daily highs of 1.1085.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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