ECB Leaves Rates Unchanged, As Expected; Euro Stable

Euro May Fall as the ECB Stays Cautious Despite Economic Upturn

Euro May Fall as the ECB Stays Cautious Despite Economic Upturn

The ECB announced it was holding the headline interest rate unchanged at 0% and the deposit rate unchanged at -0.5%.

"We're seeing inflation moving a teeny, tiny little bit but this is really minor", Lagarde said during a panel discussion at the World Economic Forum in Davos today.

"We have to look comprehensively at the effectiveness of our monetary policy", President Christine Lagarde told reporters at a press conference in Frankfurt.

She said she was aware of critical voices who anxious that climate protection would be "a distraction" from the ECB's mandate to ensure price stability, or who believed that climate policies should be left out of central banking altogether.

Why should it be the role of central banks?

The euro hovered around $1.1085, against the USA dollar on Thursday after the ECB's announcement.

But policy hawks on the Governing Council, who have long called for the ECB's money taps to be shut off, will not go down without a fight.

Lagarde urged governments to step in and start spending to make the most of the ECB's loose monetary policy in order to boost growth.

"We think the European Central Bank will cut interest rates at the end of the year when the review concludes, in order to underline its commitment to meeting the inflation target", said Paul Diggle, an economist at Aberdeen Standard Investments.

Whether humankind fails or succeeds in keeping the rise in global temperatures within manageable levels, central banks will sooner or later be called upon to act, said Benoît Cœuré, a member of the European Central Bank's (ECB) Executive Board.

Asked about a potential trade war between the United States and EU, Lagarde said she was "encouraged" by conversations between United States president Donald Trump and European Commission leader Ursula von der Leyen at Davos this week. It is the first such strategy review since 2003. "Yes it will have to do about how we deliver, how we measure, what tools we have, and how we communicate".

She said she would focus on listing to the concerns of ordinary citizens and communicating in way everyone can understand.

Lagarde refrained from revealing her favoured option pending the end of the review, expected in November or December.

"It's a broad exercise", Lagarde said.

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