By Laurie Laird
FRANKFURT (Mace News) – European Central Bank President Christine Lagarde struck an optimistic tone following Thursday’s governing council meeting, hailing recent “moderate” growth in the euro zone as fears of a global trade war recede.
“One critical development has been the conclusion of ‘phase one’ of the negotiations between the U.S. and China,” she said, referring to a limited pact signed by the world’s two largest economies last week.
Lagarde also “took comfort” in recent discussions between European Commission chief Ursula von der Leyen and U.S. President Donald Trump, who has threatened tariffs on a range of European imports to the U.S.
The governing council opted to make no changes to monetary policy, leaving the rate on its deposit facility at -0.5%, in the face of widespread German opposition to negative interest rates. “Because of that [easier] monetary policy, millions of jobs were created in the euro area,” she said.
Inflation remains well below the ECB’s target of close to but below an annual rate of 2.0%, even after an energy-fueled rise to 1.3% in December from 1.0% the previous month. But growth accelerated modestly to 0.3% in the third quarter of 2019, up from 0.2% in the previous two months.
Lagarde’s use of the term “moderate” in describing euro zone growth contrasts greatly with her language following the December governing council meeting, when she described incomig data as evidence of “muted inflation pressures and weak euro area growth dynamics.”
The improved outlook, along with the ECB’s launch of a strategy review, suggest that interest rates could remain at current levels over the medium term. The assessment – the first in more than 15 years – will last through 2020, said Lagarde.
“The situation has changed completely from 2003 [the date of the last strategic review]. For 10 years after that, the goal was to fight [excessive] inflation,” she said.
The review may address the most effective way for governing council members to express dissenting views, particularly after a number of national central banks publicly criticized the September rate cut implemented by Lagarde’s predecessor, Mario Draghi.
“We are not short of alternative views,” she said. “I’m not a despotic president. All views are welcome. All governors have their space and time” at governing council meetings.