ATHENS (Reuters) – The European Central Bank left interest rates unchanged as expected on Thursday, snapping an unprecedented streak of 10 consecutive rate hikes, and maintained its guidance which signals steady policy ahead.
Following are highlights of ECB President Christine Lagarde’s comments at a news conference after the policy meeting, which was held in Athens.
‘INACTION IS ACTION’
“There was a general, well-shared assessment of the current situation, the judgment that we have made, and the monetary policy decision that we took, which after 10 different hikes over the last 15 months is for a ‘hold’. Sometimes inaction is action, and a decision to hold is meaningful.”
NO VIEW ON RATE ‘PEAK’
“I’m not going to pass a judgement to say that ‘We are at peak’. We are data-dependent, and we are going to meeting after meeting assessing on the basis of the three criterias – the inflation outlook, the underlying inflation and the strength of our monetary policy transmission whether or not our interest rates are delivering sufficiently.”
“In addition to our response we also have to make sure that there’s proper transmission of our monetary policy throughout the whole euro area and to all countries in the euro area.
“And we have all the adequate tools in order to make sure that that happens.”
NO REGRETS IN FIRST HALF OF ECB TERM
Asked if there was anything she regretted about the first half of her eight-year mandate as ECB president, Lagarde said: “Rest assured that I have no regret. I am not going to sing it to you, but there is a famous French singer that has done that much better than I could ever to do. So no regret.”
“Our mission is price stability we have defined it in our strategy review as 2% we’re not at 2%. The best tools that we can use to return inflation to 2% are interest rates and this is what we’re using and I just want to mention that the fact that we’re holding doesn’t mean to say that we will never hike again.”
MONETARY POLICY PURPOSE
Asked about potential monetary policy-related losses among euro zone central banks:
“There is no one-size-fits-all.. What I know is that as a euro system and as the ECB we have one mission which is price stability. And we don’t have as a purpose to show profits or to cover losses, and it would be actually wrong if our decisions were guided by our p&l (profit and loss) accounts rather than for monetary policy purposes in order to bring inflation back to 2% in the medium term.”
“The fact that we are holding (rates) doesn’t mean to say that we will never hike again.”
“You have a special sentence in the mps (policy statement) that refers specifically to.. the tragic developments as a result of the terrorist attack on Israel. We are monitoring the situation. We are very attentive to the economic consequences that that could have, whether in terms of direct or indirect impact on energy prices, or the level of confidence that economic actors will continue to display.”
“Be under no doubt our determination is intact and our determination to bring inflation to 2% in the medium term is absolutely the same, if not reinforced by the proximity of the destination.”
NO RATE CUT TALK
“Even having discussion on a (rate) cut is totally, totally premature.”
NO FORWARD GUIDANCE
“Now is not the time for forward guidance.”
PEPP AND REQUIRED RESERVES DISCUSSED?
“Neither of these two questions – nor the PEPP (Pandemic Emergency Purchase Programme) nor the remuneration of required reserves have been discussed at this meeting.”
CLOSELY MONITORING INDICATORS
“Measures of longer-term inflation expectations mostly stand around 2%. Nonetheless, some indicators remain elevated and need to be monitored closely.”
ECONOMY TO REMAIN WEAK
“The economy is likely to remain weak for the remainder of this year. But as inflation falls further, household real incomes recover and the demand for euro area exports picks up, the economy should strengthen over the coming years.”
DOWNSIDE GROWTH RISKS
“The risks to economic growth remain tilted to the downside.”
“Domestic price pressures are still strong.
“The services sector is also weakening further. But this is mainly because weaker industrial activity is spilling over to other areas.”
“The euro area economy remains weak.”
(Reuters Global News Desk)