Lagarde: Eurozone growth is weak, stimulus working
New European Central Bank President Christine Lagarde said on Monday that economic growth “remains weak” in the 19 countries that use the euro but gave no indication she is contemplating adding to the stimulus enacted by her predecessor, Mario Draghi.
Lagarde said in her first regular appearance before the European Parliament that manufacturing companies were hardest hit by a “sluggish and uncertain” global economy that lowers demand for goods from eurozone companies. But she added that services companies were helping support growth and employment.
She took over from Mario Draghi on November 1, after the bank decided in September to cut its main interest rate and restart a bond-buying stimulus programme. The eurozone economy grew only 0.2 per cent in the third quarter.
Lagarde said that the ECB has “the tools to respond in case the situation does not improve” but largely confined her remarks on the monetary stance to describing existing measures.
The bank committed to purchasing €20 billion (US$22 billion) in government and corporate bonds each month, a measure that pumps newly printed money into the economy in hopes of easing longer-term credit to companies. The ECB also cut the rate on deposits from commercial banks to minus 0.5 per cent from minus 0.4 per cent, aiming to push them to lend excess cash.
Analysts say Draghi’s package of stimulus measures may have given Lagarde a period of respite in her first months in office. The September 12 decision was marked by disagreements over the bond purchases among an unusually vocal minority of officials on the 25-member governing council – a difference in policy views that Lagarde will have to manage as president. She presides over her first policy meeting on December 12.