Lagarde stresses that the ECB is not lagging behind the US on interest rate policy.
(Photo: dpa)
davos Christine Lagarde does not currently see the euro area heading for a recession. The President of the European Central Bank said in an interview with Bloomberg TV at the World Economic Forum in Davos on Tuesday. “At the moment we don’t see a recession in the euro area.”
Lagarde said she outlined the future path of monetary policy in a blog post Monday to “counter expectations that weren’t necessarily justified.” We are clearly at a turning point. “I felt it appropriate at this point to explain where the journey is going, the direction the journey is going, what the goal is in the relatively short term, and also where we are going,” Lagarde said.
On Monday, the head of the ECB announced an end to negative interest rates by the end of September. On Tuesday, the Frenchwoman reiterated that rates could be back in positive territory by the end of the third quarter. This means that the level can be zero or “slightly above”. “It’s something we will decide based on our projections and our line of reference,” added the Frenchwoman.
The deposit rate of the ECB is currently minus 0.5 percent. That means banks have to pay fees when parking excess funds with the central bank. The actual key interest rate – the so-called main refinancing rate – is zero percent.
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Lagarde also stressed that the ECB is not lagging behind the US on interest rate policy. The situation in the euro zone is very different from that in the United States. The ECB is therefore not panicking either.
The US Federal Reserve initiated its turnaround on interest rates in March. In May, she followed up with the largest monetary policy hike in 22 years and promised further steps. However, the ECB is still buying up bonds and only signaled a turnaround in interest rates for July.
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