Bienvenue, Madame Lagarde: Five questions for the ECB
LONDON (Reuters) – New European Central Bank boss Christine Lagarde holds her first policy meeting on Thursday, where investors will scrutinize her every word for a sense of the direction she will take the bank in.
A relative newcomer to the world of monetary policy, Lagarde has taken the helm at a difficult time. Her predecessor, Mario Draghi, only recently unleashed yet more stimulus to boost a weak economy and lift stubbornly low inflation.
Markets are keen to assess her take on the outlook for monetary policy and the economy, and get a sense of her communication style.
Here are five key questions for financial markets.
- How strong is Lagarde’s commitment to the September easing package?
Lagarde is expected to signal a commitment to the recent stimulus package that included an interest rate cut and the restarting of controversial asset purchases, and no major changes are anticipated at the last ECB meeting of 2019.
“The overall message will be that monetary policy will remain accommodative and there’s no change on the horizon unless there’s a change in the macro-economic outlook,” said Marchel Alexandrovich, senior European economist at Jefferies.
Signs that the economy is stabilizing give her some space. Economists do not expect significant revisions to the latest ECB economic forecasts, released on Thursday, but will pay attention to the 2022 numbers that will be forecast for the first time.
Forward-looking indicators such as Germany’s Ifo business sentiment survey and IHS Markit’s business activity index suggest the worst may be over. Fears over the U.S./China trade war and a no-deal Brexit have eased.
For a graphic on Euro zone economy expected to dodge recession, click here
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