The President of the European Central Bank (ECB), Christine Lagarde, justified, on Thursday 15 February, the Governing Council’s position of keeping the main key rates unchanged until the objective of price stability is achieved on a lasting basis (see EUROPE 13336/14).
“We are confident that the disinflation process is continuing” and that price rises are returning to a path in line with the medium-term target of 2%, Ms Lagarde said at the last monetary dialogue with the European Parliament’s Committee on Economic and Monetary Affairs under the current legislature.
In response to questions from Pedro Silva Pereira (S&D, Portuguese) and Denis Nesci (ECR, Italian), she said that the ECB needed to obtain more data to enable it to conclude that the observed trajectory was anchored. We don’t want to run the risk of this trajectory being reversed, because that would force us to take new measures, she explained.
As for the timetable, she was reluctant to go any further, limiting herself to suggesting “late spring or early summer” for a possible decision to cut the main key rates.
EMU. Invited to speak on the 25th anniversary of the single currency, the President of the ECB recalled the various phases of the ECB’s youth, when it had to establish its credibility and strengthen its monetary instruments in the face of the sovereign debt crisis and the Covid-19 pandemic.
In her view, Europeans derive three major benefits from the euro: “simplicity”, linked to circulation within the same currency zone; “stability”, with inflation maintained at an average of 2.1% since 1999; and “sovereignty”, because the euro has become the world’s second reserve currency after the US dollar. Responding to a question from Martine Kemp (EPP, Luxembourger), she welcomed the rekindled debate on eurozone membership in Sweden and the Czech Republic, while “Bulgaria is working very hard” to join the Eurozone in 2025.
“Are you going to make proposals to deepen economic and monetary union?”, asked Dimitris Papadimoulis (The Left, Greek). According to Ms Lagarde, the eurozone has strengthened, but it would be better equipped to deal with a potential financial crisis if the banking union were completed, through the creation of a European Deposit Insurance Scheme (EDIS) (see EUROPE 13349/24) and greater integration of capital markets.
On the Capital Markets Union (CMU), the former head of the IMF recalled her previous proposals, such as the creation of a European stock market watchdog (see EUROPE 13296/21) and the launch of a ‘green’ CMU focused on financing the climate transition (see EUROPE 12751/3).
Speaking on behalf of the Greens/EFA group, Belgian MEP Philippe Lamberts praised the ECB’s work in the fight against climate change, but claimed that the monetary institution could do much more, particularly through its asset purchase policy. “We are asking for more collateral in line with our climate commitments, but we need more data to penalise ‘brown’ assets”, said Ms Lagarde.
To Michiel Hoogeveen (ECR, Dutch), who questioned whether this policy was really the ECB’s responsibility, she stressed the importance of monetary policy taking “all risks” into account. And warning against the emergence of a situation where it becomes difficult to insure certain risks, with a negative impact on the banking sectors ability to grant loans.
Markus Ferber (EPP, German) also asked Ms Lagarde about the size of the Frankfurt bank’s balance sheet. She pointed out that in the second half of 2024, the ECB will gradually end reinvestment of the capital generated by the maturing of securities acquired via the ‘PEPP’ programme that was activated to deal with the Covid-19 pandemic. In the coming months, we will decide on an operational framework for managing our assets, she said, convinced that the size of the ECB’s balance sheet would be reduced. (Original version in French by Mathieu Bion)