'Bear with me,' new #ECB boss #Lagarde asks lawmakers

A relative newcomer to the world of monetary policy, the former International Monetary Fund chief has promised an overarching review of ECB business ranging from how it defines its inflation objective to whether it includes a fight against climate change among its responsibilities.

“I’m indeed trying to learn German but I’m also trying to learn central bank language,” Lagarde, a former politician and lawyer told the European Parliament’s Committee on Economic and Monetary Affairs in a regular hearing.

“So bear with me, show a little bit of patience, don’t over-interpret, if I may say,” said a seemingly nervous Lagarde, who often diverged from the text of her prepared speech and stumbled at times, leaving out phrases or repeating herself.

Lagarde took the helm at a difficult time for the ECB, which has recently resumed a €2.6 trillion bond-buying programme and cut interest rates to record lows after failing to bring inflation back to its target of just below 2%.

Lagarde said that a key focus of the review would be to determine whether its objective of keeping inflation at close to but below 2% was still valid, given changes in the global economy.

She said the review would look at whether the target should by symmetric, meaning it should be used to tackle both low and high inflation and not just the latter, if the ECB should have leeway in reaching that target, or whether there should be a tolerance band around it.

“The strategy review will be guided by two principles: thorough analysis and an open mind,” Lagarde told lawmakers. “This will require time for reflection and for wide consultation.”

She added that while inflation is the bank’s primary objective, the fight against climate change should be a central part of policy. She said that the ECB’s economic analysis should include the impact of climate change and that its bank supervision arm should also be asking lenders for transparency disclosures and climate risk assessments.

While the ECB’s private sector bond purchases have been market neutral, she said it was also worth discussing whether climate concerns should impact those purchases.

Reaffirming the ECB’s most recent assessment of the economy, Lagarde added that growth looks weak but that the ECB was determined to use all it available tools to reach its mandate.