FRANKFURT--Christine Lagarde struck a more upbeat tone on the economy in her first news conference as head of the European Central Bank on Thursday and promised a new style of leadership as she outlined a sweeping one-year review of the bank's workings.
With the euro zone economy barely expanding, the former IMF chief firmly embraced the ECB's easy money policy but suggested that the worst of the bloc's slowdown may now be over and an often-discussed but elusive recovery could now begin.
Lagarde also tackled head-on the keen anticipation in markets and media about how she would follow on from predecessor Mario Draghi, a technocrat who was hailed as one of the world's best communicators with a deep understanding of monetary policy. "I will have my own style. Don't over-interpret, don't second-guess, don't cross-reference. I am going to be myself and therefore probably different," she told reporters in what she billed as a short preamble before taking questions.
Rejecting the traditional labels of the central banking world, Lagarde said she was neither a policy hawk nor a dove, but rather an owl, who will use her wisdom to create the broadest possible consensus to heal a recent rift in the Governing Council. "Lagarde’s clear desire to seek consensus could be a sign that the hawks will be able to affect policy decisions somewhat more than during Draghi’s tenure," Kjersti Haugland, an economist at DNB said.
The planned review of how the ECB does business would start in January and aim to conclude by the end of the year, drawing from a wide range of voices, including those from civil society and academia. "It will aim not just preaching the gospel we think we master but also listening ... There is no preconceived landing zone at this point in time," she added of the exercise, which mirrors a similar endeavour under way in the United States.
U.S. Federal Reserve chief Jerome Powell has also struck a much more consumer-friendly tone since taking over last year although markets only expect a minor change in how it defines its own inflation target.
While the ECB's own review will also centre on the definition of the target, Lagarde said it would also weigh fundamental issues including how technology and climate change affect policy, and how to address rising inequalities in developed economies. The ECB targets inflation at just below 2% but has undershot this mark since 2013 and some argue that fundamental factors that guide inflation have changed, keeping a permanent lid on prices.
To take pressure off the bank, some have argued for more flexibility around the target, giving the ECB leeway since it has already exhausted conventional policy instruments and relies of untested tools such as bond purchases and ultra cheap loans to banks.
