ECB Leaves Rates Unchanged, As Expected; Euro Stable

Euro May Fall as the ECB Stays Cautious Despite Economic Upturn

Euro May Fall as the ECB Stays Cautious Despite Economic Upturn

ECB chief Christine Lagarde on Thursday (23 January) said the bank would study what role it could play in combatting climate change as part of a major policy review, warning of "the danger of doing nothing".

But the outlook for euro zone growth and inflation remains lukewarm, meaning the European Central Bank is likely to strike a cautious tone by reaffirming its warning about "downside risks" to the economy. "We missed the exit", he said.

The institution provided details about the scope and timetable of the exercise in a press release, following a press conference from its recently appointed president, Christine Lagarde.

"Moderate growth reflects the ongoing weakness of worldwide trade in the environment of continued global weakness, which has particularly affected the euro area manufacturing sector and dampened investment growth", Lagarde said.

Policymakers reiterated their pledge that borrowing costs would remain at present or lower levels until the inflation outlook had "robustly" converged with their goals.

Changing the ECB's formulation of price stability - now defined as an annual inflation rate below, but close to, 2% over the medium term - will be the focal point of the review. But it has faced increased calls to put an end to a policy that's dragged on for longer than initially expected.

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The euro (EURUSD=X) was unchanged against the dollar and pound (GBPEUR=X) in the wake of the announcement.

Lagarde urged governments to step in and start spending to make the most of the ECB's loose monetary policy in order to boost growth.

Asked about a potential trade war between the United States and EU, Lagarde said she was "encouraged" by conversations between USA president Donald Trump and European Commission leader Ursula von der Leyen at Davos this week.

Whether humankind fails or succeeds in keeping the rise in global temperatures within manageable levels, central banks will sooner or later be called upon to act, said Benoît Cœuré, a member of the European Central Bank's (ECB) Executive Board.

The question of what the bank can do to play its part in the fight will be a key plank of the ECB's newly launched "strategic review", the first rethink of its tools and goals since 2003.

She said she would focus on listing to the concerns of ordinary citizens and communicating in way everyone can understand. She said the review would likely take all review. Other topics could include digital currencies and climate change and the review could take a year to complete.

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