Lagarde: We expect ECB
interest rates to remain at their present or lower levels until we have seen
the inflation outlook robustly converge to a level sufficiently close
to, but below, 2% within our projection horizon and until such
convergence has been consistently reflected in underlying inflation
dynamics
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From ECB transcript
Simple language forward
guidance: The ECB will continue current policy until core inflation reaches 2%.
This was Lagarde’s
first press conference and there was the desire to not upset the markets and
continue the status quo, but why should there be so much
nervousness over a press conference?
The press words are used to mute clarity
and provide flexibility. Clarity associated with policy change is not desired. Some clarity of
thinking that will help all market participants understand ECB monetary policy
would be to define clearly these terms:
“robustly converge”
“sufficiently close
to”
“projection horizon”
“consistently reflected”
“underlying inflation
dynamics”
These undefined clarifying
terms all lead to market uncertainty. Perhaps we get so used to the current ambiguity that we are immune to this uncertainty. What was said may make perfect sense, but would you make large investment decisions
based on this current clarity? A change from the past for any central bank would be to say what you mean.
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