ECB Insight: Lagarde Sticks to Last Week’s Text, No New Ground During Q&A

14 February 2022

By David Barwick – FRANKFURT (Econostream) – As in her appearance at a hearing of the Committee on Economic and Monetary Affairs of the European Parliament exactly one week ago, Lagarde on Monday made prepared remarks with the same more dovish tone than at the press conference on February 3, but went strictly no further.

Speaking this time at the European Parliament plenary session on the ECB Annual Report 2020, Lagarde, the 14 paragraphs of her introductory speech under the subheading ‘The euro area economy and the ECB’s monetary policy’ were virtually identical to the same section of her opening remarks a week earlier, with no deviation of significance.

It was thus during the Q&A that Lagarde would have had the opportunity to fine-tune or add to last week's messaging, having first had to listen to almost an hour of pointed questions at times bordering on harangues.

She capitulated before the sheer number of questions, declining to mount an attempt to answer them all and instead limiting herself to what she called ‘three key areas, where I would like to give you some feedback.’

One of those areas was ‘what matters and what is the framework within which we make monetary policy decisions.’ Another was climate change, and the third was a defence of the ECB against the charge that its policy ‘benefits large corporate accounts and not so much the real economy’.

Lagarde however was not trying to communicate with financial markets on this occasion. The brevity of her remarks suggested that she saw no need to add to her February 7 comments. Had she seen such a need, there was no shortage of questions that could have served as useful springboards for providing market guidance.

Repeating the conditions of the ECB’s forward guidance, she said that these were ‘helping us identify whether we are at target for the medium term, as we have identified in our strategy.’

‘The other element of forward guidance, which deals with the next point that I want to make, is the sequence, and that is the forward guidance that we’ve identified in terms of when do we look at interest rates relative to asset purchases?’ she continued. ‘Well, we complete net asset purchases and only then we look at interest rate hikes. So we have these elements that actually guide us in order to make decisions.’

‘Final point, which is very important, is that the decisions we make are data-dependent’, she said. ‘It cannot be just on the fly, it cannot be a political decision. It has to be rooted in data and determined by data. And it will be so in that sequential and gradual way’.

And that was it – a total of about seven and a half minutes of A to deal with some 55 minutes of Q.