Investors' eyes on ECB's first meeting with Lagarde

No change in interest rates expected at ECB's Thursday meeting, while markets focus on new president's words

Burhan Sansarlioglu and Aysu Bicer   | 11.12.2019
Investors' eyes on ECB's first meeting with Lagarde


Christine Lagarde on Thursday will be on spotlight as president of the European Central Bank (ECB) as she sets to chair her first monetary policy gathering where investors will analyze signs of a change in policy.

Economists argue that Lagarde stands out as a good communicator, but as the new president is trying to learn the language of the central bank, her monetary policy statements can be misunderstood by investors.

This week’s ECB meeting will be the first policy-setting meeting with Christine Lagarde as new president.

"The excitement in markets in the run-up to the meeting does not so much stem from possible policy changes but rather from how Christine Lagarde’s communication style will compare to Mario Draghi’s," Peter Vanden Houte, the chief eurozone economist of ING Bank, told Anadolu Agency on Wednesday.

He added that with the eurozone economy having stabilized somewhat at very fragile levels and inflation being far off the ECB’s target, there are hardly any economic arguments for the ECB to adjust its monetary policy stance.

"No big changes are to be expected for GDP and inflation," he noted, adding that ECB officials, a majority of the Governing Council, seems happy with the current monetary policy stance."

According to him, any changes, even in the "soft" communication would be a surprise.

- 'Lagarde tries to learn central bank language'

"ECB is likely to take a wait-and-see stance," said Michael Schubert, a senior economist of Commerzbank, expecting the Governing Council to formally decide in early 2020 to start a review of its strategy, he noted.

"Lagarde has already put into practice her announcement of explaining monetary policy not only to financial market experts, but also to the man on the street," he said.

He added that Lagarde is still trying to learn the central bank language, creating a danger that financial markets misinterpret some of her remarks.

Andrew Kenningham, chief Europe economist of Capital Economics, also commented on Lagarde' presidency, saying:

"As head of the IMF, she has earned a reputation as a good communicator but there is still ongoing concerns that she will be less fluent in talking about monetary policy."

Lagarde's new position is considered important for the changing missions of central banks across the globe, especially after the 2008 global financial crisis, focusing on strategic communication and coordination with all other economic institutions rather than implementing strict monetary policies.

Although by background alone she may not seem to be the best option for the ECB, she has a skill set that is hard to ignore, including an international reputation and a keen understanding of diplomacy.

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