ECB’s Lagarde: Not Yet Ready to Shift to More Forward-Looking Policy, Rates Still Restrictive

4 December 2024

ECB’s Lagarde: Not Yet Ready to Shift to More Forward-Looking Policy, Rates Still Restrictive
Christine Lagarde, president of the European Central Bank, at the ECB Forum on Central Banking in Sintra on July 2, 2024. Photo by the ECB under CC BY-NC-ND 2.0.

By Marta Vilar – MADRID (Econostream) – European Central Bank President Christine Lagarde said on Wednesday that the ECB was not yet at the point at which it could shift its policy stance to one more forward-looking as rates were still restrictive.

In the Q&A session following her prepared remarks at the Committee on Economic and Monetary Affairs in the EU Parliament, Lagarde said that ‘at some point in time, not today, because we have some ground to cover’ the ECB would change its backward-looking approach and focus on more forward-looking elements.

‘Our battle against inflation is nearing completion, not completed, not mission accomplished yet’, she said.

Asked about ECB Chief Economist Philip Lane’s comments on Banca d’Italia Governor Fabio Panetta’s call for a more forward-looking perspective, Lagarde said the shift towards this approach had not occurred yet.

‘When I say the path is clear, downward, it will continue to go lower. At which pace? I cannot say today, because we will continue to be data-dependent, and the shift has not happened yet’, she said.

The change to the ECB’s monetary policy stance in this regard would be applied once the battle against inflation had been won, she added. ‘At that stage it will change.’

Confronted with a question about the ECB’s rate decision next week, Lagarde reiterated that she would not pre-commit to a particular cut size.

‘[W]hile I will say that we are on a disinflationary path and we know that the direction of travel is downward, the pace at which we move down the hill is not predetermined and I am not going to commit to any particular number, for sure’, she said.

Europe had to negotiate with the US about potential tariff hikes, according to Lagarde, but any will to negotiate should not be regarded as a ‘white flag’.

Regarding bond yield moves in France and a potential implementation of the Transmission Protection Instrument, Lagarde said, ‘I will not address any particular member state’.

 

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