TRANSCRIPT: ECB President Lagarde Press Conference During Informal Ecofin

25 February 2022

By David Barwick – PARIS (Econostream) – Following is the full transcript of the most relevant comments made by European Central Bank President Christine Lagarde at the press conference during the Informal Ecofin on Friday:

‘I just want to tell you that the ECB is closely monitoring the evolving situation. It will conduct a comprehensive assessment of the economic outlook, which will include all the latest developments and which will form the basis of our policy meeting, which will be a monetary policy Governing Council meeting, on the 10th and 11th of March. The ECB and all national central banks in the Eurosystem will implement decisively and rigorously all the sanctions decided by the EU and the European governments. To give you an example, that will apply to supervision, that will apply with cutting off liquidity access for the targeted banks with a view to essentially freeze asset and starve access to finance. Additionally, the ECB stands ready to take whatever action is necessary within its responsibilities to ensure price stability and financial stability in the euro area. I would like to mention one inscription that any visitor to the ECB will read, because it is on the walls of the visitor centre. And this is a quote by Jean Monnet, who says, “It is better to fight around the negotiation table than on the battlefield.” Never more than today has this been true. I would like to add on the economic and financial impact that some of you might be interested in that we discussed the implication of the military aggression against Ukraine. It is at this point in time premature to assess exactly the economic impact of the current conflict, because the situation is evolving by the hour. What we know is that the two main channels through which the euro area economy will be affected will be through energy prices and through the confidence or uncertainty channel. Not so much through trade, which is limited between Russia and the euro area. On energy, gas and oil prices soared on Russia’s invasion of Ukraine, given the weight of Russia as an energy supplier, roughly 22.2% of the euro area energy imports. At this point in time, gas prices stand about six times, six times as high as one year ago, and oil prices 54% higher than one year ago. Uncertainty is already reflected in financial markets, where sentiment did deteriorate, but with no disorderly disruption. We are currently updating our projection on growth and inflation, which will be published on the 10th of March at our next Governing Council meeting. Any number that are floating around are, as I said, premature, simply because it is evolving constantly as we speak. And they will be refined and fine-tuned for March the 10th. On inflation we will evaluate the impact of rising energy prices, which are likely in the short term to increase inflation numbers. Persistent uncertainty, though, will probably be a drag on consumption and investment and will impede growth. And given the current uncertainty that I have mentioned, it is more than ever critically important to be guided by the two principles of optionality and flexibility. Those are the four, sorry, two of the four principles that will guide us. As I said, we will operate within our mandate, price stability, financial stability, we are data dependent, we will move gradually. But in any event, we will be guided by speed in case of an emergency – we have done it at the time of Covid. We will be guided by the need to maintain confidence. Liquidity will be available. We will make sure that that is the case. Payment systems will work properly. And three, cash will be available. And the other two principles I have just mentioned: optionality in order to adjust to the changing circumstances, and flexibility in order to have full capacity to respond to this times of crisis. Thank you.’

‘The European Central Bank has a mandate that is very clear: price stability, financial stability. Within this framework, we have a strategy that is also clear: an inflation objective that is a symmetrical 2% in the medium term. So in March, June, September, December, each time we will examine the projections provided us by staff, take into account the totality of geopolitical developments also and then adjust our monetary policy so as to conform to our mandate…’

‘I’m sorry to disappoint you, but the response to your question [as to whether normalisation would be delayed such as to mean no rate hike would be less likely in 2022] would be entirely premature and inappropriate, because as I just said, we have a 2% symmetric medium-term objective, we are data-dependent, and we are going to look at data very carefully. We will include in that the geopolitical development, which clearly will have a bearing, but we are driven by our mandate, which is price stability and financial stability, and we will make those decisions comes the next monetary policy meeting and then subsequently in June, September and December. That will be the case, I can assure you, on the basis of data and the good judgment of the Governing Council.’