Former IMF Chief, Christine Lagarde is scheduled to deliver her first monetary policy announcements as ECB president on Thursday, with observers set to scrutinize every word for hints of the bank’s future direction at a time of stuttering Eurozone growth.
Lagarde is widely predicted to leave her predecessor Mario Draghi’s ultra-loose monetary policy unchanged after chairing her maiden meeting of the European central bank’s governing council in Frankfurt.
But the former International Monetary Fund Chief can expect a grilling at the post-meeting press conference about her planned review of the ECB’s objectives and way of working.
The timing and scope of the “strategic review” are still unclear, but the outcome could lead to a major shake-up amid calls for the ECB to rethink its inflation target and take more climate action.
Lagarde, a lawyer and not an economist by training has herself pleaded for patience, saying she has been on a steep “learning curve” since taking up the job last month.
One of Lagarde’s first moves upon arriving in Frankfurt was to take the council on a retreat to heal the rift and ECB watchers will be keen for an update.
The ECB will also unveil its latest growth and inflation projections on Thursday, which for the first time will run through to 2022.
Eurozone growth is slated to reach just 1.1 percent this year.
Eurozone inflation stood at one percent in November well below the ECB’s target of “close to, but below” two percent, fuelling debate about whether the inflation goal is still appropriate.
While Lagarde has signaled she will stick close to Draghi’s easy-money policies, concerns are mounting about the negative impact of subzero rates on banks and savers.
The ECB recently slashed the deposit rate from -0.4 percent to -0.5, meaning banks have to pay more to park their excess cash at the ECB.
Lenders have long complained that the fees, on top of the ECB’s other stimulus efforts, are squeezing their already tight profit margins in a low-rate environment.
Many Eurozone banks are already passing the charges on to their wealthiest customers, but some German lenders have started charging even small retail clients for their savings — a deeply unpopular move in a nation of savers.
