For the first time in 15 years, the Board of Directors of the European Central Bank he started the review of its monetary policy strategy, as announced last month by the new president, Christine Lagarde. The procedure "will concern our way of communicating, deciding and measuring, it will be a wide-ranging exercise", said the number one of the Eurotower, specifying that the review will be completed by the end of the year and that it will also concern the measurement of inflation ( including the question of whether to include property and rental prices), as well as the side effects of low interest rates.
Climate will also be part of this rethinking of strategic priorities. "The climate change – said Lagarde – it is everyone's responsibility, wherever we are we have to fight it. Several departments of the ECB are working to understand the impact of climate change on risk management, models and forecasts. In the meantime we are already moving - she said - as regards the ECB's own funds, such as the pension fund for example, we are accentuating the emphasis on sustainability requirements“. Lagarde added that the strategic review could also lead to changes on the front of the purchases of corporate bonds in the context of Qe. Furthermore, the number one of the ECB said she shared the analysis of the Bank for International Settlements according to which climate change represents a threat to financial stability.
For the moment, as expected, no news on the monetary policy front: interest rates remain at an all-time low (0% on major refinancing operations, 0,25% on marginal operations, -0,50% on deposits with the central bank itself) and the second round of Quantitative Easing continues as planned, with the pace of purchases at 20 billion a month. The Governing Council reiterated that Qe will end "shortly before" the next rate hike, which in any case still remains an undefined future prospect. The cost of money will rise again until "inflation prospects" converge towards the ECB's target, ie a level below but close to 2%.
The central institute intends then keep reinvesting, in full, principal payments on maturing securities for an extended period of time after the date on which it starts raising key interest rates “and in any case as long as necessary to maintain favorable liquidity conditions and an ample degree of accommodation monetary".
At the press conference, Lagarde reiterated the request to the countries that can (i.e. those with sufficient budgetary margins) to "timely" support the accommodating line of the ECB with expansionary budget policies. Countries with high debts, on the other hand, must maintain prudent policies and pursue recovery targets, said the ECB president.
As for the risks for the euro area economy, for Lagarde they remain oriented towards the downside, "but they have become slightly less pronounced": the data received from December are "in line with our basic forecasts. The weakness of manufacturing remains a ballast on the euro area economy, however the persistent growth of employment, albeit decelerating, continues to provide support”. As for theinflation, is expected to be at levels similar to the current ones in the months to come, while public expectations on the cost of sight remain low but have recently increased.
