By Laurie Laird
LONDON (MaceNews) — The European Central Bank will continue to rely on asset purchases as its main policy tool, but is not averse to further rate cuts down the line, according to ECB President Christine Lagarde.
Rate cuts “work better in certain circumstances … not necessarily in a crisis situation as we are at the moment,” she said in a pre-recorded interview broadcast at the Wall Street Journal online CEO Council Summit. It was not clear when the address was recorded.
However, the ECB chief believes that rate cuts could be effective later in the business cycle. “You can go negative until you hit the reversal rate. We’re not at this point,” she said.
Lagarde refused to be drawn on the merits of symmetrical inflation targeting, despite seeming to endorse the strategy in a recent address. “The issue of symmetry” has been widely discussed amongst economists and the media, she noted. “It’s certainly an issue that we will take up” in the ECB’s ongoing strategy review. “We’re going to follow our own course.”
In a speech one week ago, the ECB president noted that a symmetric inflation target “can strengthen the capacity of monetary policy to stabilize the economy when faced with the lower bound” of interest rates.
Lagarde was similarly reticent to discuss whether recent appreciation of the euro could complicate the ECB’s ability to meet its inflation mandate. “We don’t target [the exchange rate]. We try not to talk about it. We are attentive to it.”
She also reiterated her belief that the Eurozone recovery remains” incomplete, uncertain and uneven.” Growth will not regain pre-Covid levels until end end of 2022, with that forecast based on the assumption that a Covid vaccine will “be in place by the middle of 2021.”
The ECB president was hopeful that the UK and the European Union could compete a trade deal “at the last minute of the finishing hour.” Britain is due to conclude a transition period at the end of the year and the two sides have yet to agree a new trading regime.
Lagarde was scheduled to participate in a panel discussion at 1400 GMT on Tuesday.