Smooth-talking Lagarde faces first ECB grilling


New European Central Bank president Christine Lagarde makes her first monetary policy announcements Thursday, with observers hunting for clues to her leadership style and the bank’s response to stuttering eurozone growth, reports BSS/AFP.

A 1:45 pm (1245 GMT) statement is expected to unveil no change to predecessor Mario Draghi’s ultra-loose monetary policy following Lagarde’s maiden meeting of the ECB’s governing council in Frankfurt.

But the former International Monetary Fund chief can expect a grilling at the post-meeting press conference.

“Monetary policy involves a lot of subtle signalling and it remains to be seen if and how Lagarde will be willing to drop policy hints, or use code words to guide markets,” said Frederik Ducrozet of Pictet Wealth Management. 

With a background in corporate law, she is the first ECB chief who is not a trained economist.

She is also admired as an effective communicator. Lagarde has herself pleaded for patience, saying she has been on a steep “learning curve” since taking up the job last month.

“I am trying to learn German, but I am also trying to learn central bank language,” the one-time French finance minister told MEPs last week, acknowledging the market-moving impact of even a single ambiguous word.

Perhaps more than policy shifts, observers will be listening closely for hints about a “strategic review” — the institution’s first since 2003.

The timing and scope of the review remain unclear, but it could lead to a major shake-up amid calls for the ECB to rethink its inflation target and take more climate action.

– Tensions –

In his final act as ECB chief, Draghi in September unveiled fresh stimulus to bolster the 19-nation euro area, which has been weighed down by US-China trade tensions, Brexit uncertainty and a weakening manufacturing sector. As well as offering a new round of cheap credit to lenders, Draghi slashed a key interest rate deeper into negative territory and kept others at historic lows. He also restarted a controversial bond-buying programme to the tune of 20 billion euros ($22 billion) a month, in the hopes of encouraging spending and investment. 

But several of the ECB’s 25 governing council members opposed the asset purchases, leading to an unprecedented public spat led by criticism from Germany’s Bundesbank central bank chief Jens Weidmann.

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.