In order to change its monetary policy, the European Central Bank (ECB) is likely to announce today the start of a major review of its strategy – the first in 16 years, world agencies have reported.
New ECB chief Christine Lagarde is expected to officially announce a year of major press conference changes after the bank’s first meeting of the year.
The nineteen euro area members continue to report only moderate growth and inflation below the target of just under 2 percent, so the ECB is expected to leave its monetary policy unchanged. This includes the record low refinancing rate of zero.
At a press conference in December, Lagarde indicated that the bank anticipates a full review of the strategy and plans to “rollover every stone”, reviewing its policies and instruments. This includes assessing the secondary effects of emergency instruments, such as negative interest rates, but also something completely new – addressing climate challenges.
The review is expected to be completed by the end of 2020.
Changes could include, for example, greening the purchase of private and government bonds – the famous quantitative easing that has plunged the ECB with over 2.6 trillion euros from 2015 to support the economy. Now, these bond purchases can be oriented towards assets that meet environmental criteria.
Analysts expect at today’s press conference Lagarde to make a more optimistic assessment of the risk weighing on economic growth, but without announcing a turn to tighter policy.
For her, this will not be a new challenge, as Lagarde was already the first woman to become the French Minister of Finance and Managing Director of the International Monetary Fund (IMF).
“A lot of things are personal. One of my personal characteristics is definitely that I’m a woman. Men don’t have to prove themselves to me because relationships between men and women are of a different nature, and that helps me,” Lagarde said in a statement in 2015.
When France chaired the G20 in 2011, it succeeded in launching a large-scale program to reform the international monetary system.
Lagarde is known for her statements on topics such as gender equality, economic inequalities, climate change, and the fight against corruption. Thanks to her efforts as an IMF leader, these issues have been more widely publicized and have been incorporated into the organization’s financial assistance programs and economic reports.
On July 5, 2011, Lagarde became the 11th managing director of the IMF, replacing Frenchman Dominic Strauss-Kahn, who resigned over allegations of sexual misconduct. Nearly a month after taking office, an investigation was launched against her on suspicion of negligence in the performance of her duties as finance minister. It was part of a case involving French businessman Bernard Tapi, which had been under consideration for over 20 years.
In 2016, the French Court of Justice, which exclusively deals with cases of misconduct committed by members of the government, found Lagard guilty but did not sentence her. The decision was taken despite recommendations by the French prosecution to dismiss all charges against Lagarde.
One of her most important tasks under the leadership of the IMF is the completion of the reform of the Fund, launched at the initiative of the G20 in 2010, with a view to redistributing voting rights to developing countries. The process has been delayed since the amendments were not ratified by the US, which has the largest share of votes in the IMF. Lagarde repeatedly called on the US Congress to approve the reform, which only happened in December 2015. As a result, Russia, Brazil, India, and China have entered the fund’s top ten shareholders.
Lagarde has played an important role in revitalizing relations between IMF members
Lagarde has played an important role in revitalizing relations between IMF members, including emerging markets and developing countries. Under her leadership, the rules for granting loans were amended in 2015, and the Fund can now provide financial assistance to countries that have obligations to other countries. Equally important was the decision to include the Chinese Yuan in the IMF currency basket on October 1, 2016, alongside the US dollar, the euro, the yen, and the British pound, TASS recalls.
On February 19, 2016, the IMF Executive Board unanimously approved Christine Lagarde as head of the organization for another five years. Starting with her second term on July 5, she identified the Fund’s primary task as achieving greater flexibility and effective response to Member States’ needs. In 2018, Lagarde announced a reassessment of IMF policy, notably in supervisory, financial sector assessment programs and preferential lending instruments. He also issued a number of warnings to the world about the dangers of trade and currency wars between China and the US.
The ECB, unlike the IMF, has always been governed by a leading economist or former central banker of any European country since its founding in 1998. But now the presidential chair will be a diplomat and a negotiator, not a technocrat.
“Maybe she is not an economist with monetary policy views, but she is a diplomat who sticks to them,” said former German Deputy Finance Minister Jörg Asmussen, who is currently part of the leadership of a major New York bank. “She is very charming and this is one aspect of her style in politics. In crazy ministerial meetings, she drew French pasta at three o’clock at night,” he recalls.
The former member of France’s synchronized swimming team, in 2012, Lagarde received the Legion of Honor. Residents and guests of the US capital could see the IMF leader calmly ride a bicycle downtown. She also loves swimming, diving, yoga, skiing, and playing tennis. Many note the casual way in which the Frenchwoman communicates with the media.