European Central Bank keeps rates low as Christine Lagarde takes helm
2 min read 12 Dec 2019, 07:12 PM ISTThe bank left its deposit rate at minus 0.5% and its main refinancing rate at zeroAnalysts will look for signals on how she will manage dissent on the ECB's 25-member governing council
PremiumFRANKFURT : The European Central Bank left its key interest rate benchmarks and stimulus programs unchanged on Thursday, when it held its first policy meeting under its newly appointed president, Christine Lagarde.
The bank left its deposit rate at minus 0.5% and its main refinancing rate at zero. The decision to not change policy follows a similar one by the U.S. Federal Reserve this week as central banks monitor the health of major economies.
Investors are now waiting for Lagarde to give her first official assessment of the European economy at a news conference in Frankfurt, Germany.
Analysts think Lagarde will stress that the economy still needs support from the central bank, and that policymakers must be on their guard against things turning out worse than expected.
Doubts have grown about how much good additional central bank action can do to support developed economies; the US Federal Reserve on Wednesday kept interest rates unchanged and signaled it would leave them alone through 2020.
Instead, interest is focused on Lagarde, who is presiding over her first meeting since she was appointed by European leaders as the head of the institution that sets monetary policy for the 19 euro countries that use the euro and their 342 million people. She is well known from her previous jobs as head of the International Monetary Fund and as French finance minister but investors will want to see how she communicates and explains the complexities of monetary policy to markets and voters.
Other themes that may come to the fore at her news conference are her plans for a review of the bank's monetary policy framework and how it defines price stability, the goal it is supposed to seek under the European Union treaty. There's also been discussion of whether the ECB should do more to support financing of projects aimed at fighting environmental pollution and climate change.
Analysts will look for signals on how she will manage dissent on the ECB's 25-member governing council. A minority criticized the measures enacted under predecessor Mario Draghi on Sept. 12.
Those included a cut in the deposit rate to minus 0.5% from minus 0.4%. The rate is charged on excess cash left at the central bank overnight by commercial banks, so the negative rate is in effect a penalty that aims to push banks to lend the money to companies. The bank also started 20 billion euros ($22 billion) in monthly purchases of government and corporate bonds.
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