Lagarde Takes the Helm at ECB, Holds Rates Steady

Christine Lagarde has chaired her first meeting of the European Central Bank’s Governing Council and, as expected, has held the deposit rate steady at -0.5% and reiterated the ECB’s intention to continue with the €20 billion monthly quantitative easing programme until inflation picks up.

Ms Lagarde has stressed her tenure show be viewed in a different light to the previous head of the ECB Mario Draghi:

“Don’t second-guess; don’t cross-reference. I’m going to be myself, and therefore probably different.”

Despite this, she has committed to the same policies as advocated by him. So, while the style may be different from the shrewd and technocratic Mr Draghi, the substance of her decisions and her direction is almost identical to her predecessor. This was evidently shown when she, like Mr Draghi before her, called for more government spending to help stimulate economic growth alongside expansionary monetary policy:

“In order to reap the full benefits from our monetary policy measures, other policy areas must contribute more decisively to raising the longer-term growth potential, supporting aggregate demand at the current juncture and reducing vulnerabilities... Governments with fiscal space should be ready to act in an effective and timely manner.”

The price of gold per troy ounce in euros largely follows the same pattern as the price in sterling, except the euro price was more volatile, which may reflect the domestic strike trouble in France and reactions to the recent British election. Gold is currently priced in euros at €1326.95, which is a rise of just 0.36% over the week.

Gold Price Per Troy Ounce in Euros Over the Last Week

Elsewhere in the world’s central banks, the Federal Reserve in the United States also held it base interest rate steady, citing below-target inflation levels, and the Bank of England is likely to fast-track the appointment of a new governor on the back of a decisive election result in the United Kingdom. The current governor, Mark Carney, is scheduled to leave his post on the 31st January 2020. 

The full transcript of the ECB's press conference can be found here.