By Marta Vilar – MADRID (Econostream) – European Central Bank President Christine Lagarde said on Thursday that the ECB is in “a good place” but that it should remain “agile” as it monitors evolving developments and their implications.

Answering questions before the European Parliament’s Committee on Economic and Monetary Affairs in Brussels, Lagarde reiterated that while the ECB monitored the exchange rate closely, it did not target it.

She said it was unclear whether the recent depreciation of the US dollar reflected deliberate US policy or was instead driven by fundamentals, uncertainty or investor sentiment. The March staff projections, she added, will incorporate the exchange rate prevailing at the technical cutoff date.

“But we do look very carefully at those movements,” she said.

Lagarde described monetary policy transmission as “unimpaired”, but said the ECB would remain “very attentive to it”, pointing to the “slight” tightening of lending conditions to corporates seen since November.

The ECB’s data-dependent approach was “perfectly legitimate” in the current situation, she said.

“Now, some people argue that we have too many data and we should, you know, stop this data dependency,” she said. “I'm sorry, but I'm really convinced that that's what we should be really focusing on.”

At the same time, she said that judgement remained central, with scenario analysis complementing the data.

“And when we say that we are in a good place but agile, that's really what we mean,” she said. “We have to be attentive to all these developments, their consequences and the monitoring that we can do of it.”

Lagarde avoided addressing an MEP’s claim that in “recent statements” she had implied she would leave early, making no mention of it in her response to the question.

However, asked more directly about her professional future, Lagarde said her “baseline” is that delivering on and consolidating her mission would take until the end of her term, pointing to price stability, financial stability and the digital euro as priorities.

Turning to Germany, she said recent PMI readings were moving “in the positive direction” after a prolonged difficult period.

Lagarde also said the ECB should continue strengthening the international role of the euro, pointing to recent changes to its repo facilities that allow global counterparties to transact in euro with confidence, even in times of crisis.

 

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