New European Central Bank (ECB) President Christine Lagarde held her first policy meeting “in an environment of continued global uncertainties” and launched a wide-ranging review of the ECB’s monetary policy strategy which should deliver conclusions by end of 2020.
Such review starts “as our economies are undergoing profound changes (ageing population, low productivity, digitalization), it is the time for a strategy review to ensure we deliver on our mandate in the best interest of Europeans,” said Lagarde.
Also, in line with many people’s aspiration for less pollution and for more environment-friendly economies, the ECB aims to better take into account climate change and could modify its 200 billion euros corporate bonds holdings accordingly.
“Climate change is actually a threat to financial stability, we are (therefore) taking climate change into account in order to improve the way in which we operate at the moment,” stated Lagarde.
Not only the global economy keeps switching from a West-centered to an Asia-Pacific-centered paradigm fueling growing trade imbalances and related tensions over what’s perceived as unfair globalization, Cyceon points out, but increasing discontent over uncontrolled migrations, rising inequalities also poses a central challenge to the ECB’s policy.
Inside the euro area, for instance, Germany’s overwhelming industrial leadership keeps generating negative narratives especially in France and southern Europe where radical movements are thriving.
The euro produced ambivalent results since 2002, and negative effects surpass positive ones within a growing, more politically active than average part of the electorate, Cyceon underlines, the ECB should thus work at better including political developments into its strategic thinking.
Overall, Lagarde said the ECB will continue to work in full respect of its price stability mandate and drew attention by warning markets not to assume ECB policy is “on autopilot”.
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