ECB’s Lagarde: Started Discussion on Dialling Back Restrictiveness

7 March 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Thursday said that the Governing Council had started the discussion about changing the monetary policy stance, but that it still required more data to be sure about the disinflation process.

During the press conference following the Governing Council’s meeting, Lagarde said that the Governing Council had ‘just begun discussing the dialling back of our restrictive stance, but of course we need a lot of more information coming in the next few months to be sufficiently confident.’

‘When you look at what will be published, what data we will have both in terms of activity, in terms of wages, in terms of profits, we will have a little in April and we will have a lot more in June, and it matters because we’re data-dependent’, she said.

She acknowledged that there had been progress towards the inflation target, adding that ‘we’re more confident as a result, but we’re not sufficiently confident and we clearly need more evidence, more data and we know that this data will come in the next few months, we will know a little more in April, but we will know a lot more in June.’

Asked about the updated macroeconomic staff projections, which saw the inflation outlook revised downwards, she said, ‘I wish everything was closer to our target. We’re not there yet, we are not there’, noting however that it was not necessary to see 2% spot inflation to make decisions.

As the ECB remained data-dependent, she wouldn’t commit to any rhythm of easing once the process started.

‘We will continue to observe how the economy evolves, how labour market moves, how wages moderate, the impact of tightening in the financing of the economy, and all these factors will be taken into account to determine future moves’, she elaborated.

Similarly, she refrained from specific comments on market expectations other than to say that they seemed to ‘be converging better’.

‘We look at the three elements, we look at our projections, we try to anticipate the impact of our monetary policy and that’s how we make decisions, not by being determined by what markets consider’, she said.

The ECB’s decisions on interest rate cuts were independent from those of the US Federal Reserve, but the ECB was ‘mindful of the international environment’ in which it operated, she said.

‘What I hope we can do ourselves is be attentive, monitor carefully’, she said. ‘Once the data confirm that we are sufficiently confident to reach our 2% target in the medium term and assured that it could be sustainable, we will act.’