'Wise owl' Lagarde launches major ECB review

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Michelle FITZPATRICK, Tom BARFIELD
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Frankfurt am Main (AFP) - Christine Lagarde on Thursday announced a major review of the ECB's tools and goals and said the eurozone slowdown was beginning to ease, as she made her debut as president vowing to bring her "own style" to the job.

Speaking at a Frankfurt press conference after chairing her first governing council meeting, Lagarde said the bank would launch its "strategic review" next month and aim to finish by "the end of 2020".

A central focus of the reassessment, the ECB's first since 2003, will be whether the bank's main objective of keeping inflation "close to, but below" two percent remains relevant after years of anaemic price growth.

Lagarde said she also wanted to focus on "major changes" in society since the last review, including the challenges posed by climate change, technological advances and rising inequality.

As expected, Lagarde kept her predecessor Mario Draghi's ultra-loose monetary policy unchanged Thursday, holding interest rates at historic lows and leaving a 20-billion-euro ($22.2 billion) per month bond-buying programme untouched.

The policies are designed to bolster the 19-nation eurozone economy and drive up inflation at a time of weak global growth, weighed down by US-China trade rows and Brexit uncertainty.

Lagarde said the ECB was seeing "some initial signs of stabilisation in the growth slowdown", despite "persistent global uncertainties".

While manufacturing remained weak as trade tensions fester, the services and construction sectors remain "resilient", she said.

- Neither hawk nor dove -

Although her maiden press conference was light on monetary policy news, Lagarde showed she was keenly aware that her performance was being closely scrutinised.

The former International Monetary Fund chief who has no prior central banking experience took pains to urge observers not to weigh her every word or compare her to former ECB boss Mario Draghi.

"Don't over-interpret, don't second guess, don't cross reference, I'm going to be myself and therefore probably different," she told journalists.

"Once and for all, I'm neither a dove nor a hawk, and my ambition is to be this owl, that is often associated with a little bit of wisdom," said Lagarde.

"For ECB watchers and financial market participants... learning how to read Christine Lagarde will take some time" said ING bank economist Carsten Brzeski, judging it "not always clear whether Lagarde spoke on behalf of herself" or the ECB council.

The ECB also unveiled its latest growth and inflation forecasts, for the first time running through to 2022.

Risks to the euro area outlook "remain tilted to the downside, but have become somewhat less pronounced", Lagarde said.

The bank trimmed its eurozone growth forecast for 2020 to 1.1 percent from 1.2 percent, but said it saw output strengthening to 1.4 percent in the following two years.

Inflation meanwhile is predicted to climb from 1.1 percent in 2020 to 1.6 percent in 2022 -- bringing the ECB closer to its target.

"Is it satisfactory? It's certainly directionally good, but is it the aim that we pursue? No," Lagarde said.

- Going green -

Pressed for details on the planned review, Lagarde said there was "no preconceived landing zone".

But calls are growing for the ECB to loosen its strict inflation goal after years of stubbornly low growth, and change the way it calculates inflation.

Lagarde herself explicitly mentioned possibly including housing costs in the measurements in future.

The ECB's first female president has also repeatedly stressed that monetary policy has a role to play in tackling the climate crisis, even if the real driver for change lies with fiscal policy.

She said the bank would be speaking to lawmakers, academics and civil society representatives to hear their views.

The focus on climate change comes just days after new European Commission head Ursula von der Leyen unveiled a "Green Deal" for the bloc that aims to build a carbon neutral economy by 2050.

Lagarde praised "the ambition" shown by the initiative and said she hoped it would win widespread backing.

"In our strategic review we will take up climate change, we will take up the fight that is taken up by the European Commission and I hope other European institutions, and see where and how we can participate."