ECB’s Lagarde: Nearing End of Emergency, Forward Guidance to Help Achieve Price Stability

17 October, 2021

By David Barwick – FRANKFURT (Econostream) – The European Central Bank’s forward guidance will continue to support the achievement of price stability even after the approaching end of the pandemic-related crisis, ECB President Christine Lagarde said Saturday.

Speaking at the IMF Annual Meetings about ‘a future in which globalisation becomes a more unpredictable terrain’, Lagarde called on Europe to ‘implement policies that strengthen our internal sources of growth.’

Monetary policy’s role in this regard was to ‘continue supporting the economy in order to durably stabilise inflation at our 2% inflation target over the medium term’, she said. ‘The ECB is committed to preserving favourable financing conditions for all sectors of the economy over the pandemic period.’

‘And once the pandemic emergency comes to an end – which is drawing closer – our forward guidance on rates as well as asset purchases will ensure that monetary policy remains supportive of the timely attainment of our target’, she said.

Lagarde called on fiscal policy support to continue ‘until the recovery is more mature’, but to ‘shift from a blanket approach to a more targeted action plan that supports sustainably higher demand.’

‘This means that fiscal policy will need to facilitate structural changes in the economy rather than preserving sunset sectors’, she said. ‘And, taking a medium-term perspective, it will need to follow a rules-based framework that underpins both debt sustainability and macroeconomic stabilisation.’