Bundesbank chief Jens Weidmann on Thursday (28 November) batted back calls for the European Central Bank to take a bigger role in protecting the environment, saying it was up to goverments and not the ECB to fight climate change. "If the central target is seen as a ceiling, we have less a chance of meeting it", ECB policymaker Francois Villeroy de Galhau said recently.
Christian Sewing, chief executive of Deutsche Bank, told an audience at the World Economic Forum in Davos that the ECB had missed an opportunity to reclaim room for monetary policy manoeuvre, given that trade tensions between the United States and China are easing and the risk of a no-deal Brexit has been averted.
She said she was aware of critical voices who anxious that climate protection would be "a distraction" from the ECB's mandate to ensure price stability, or who believed that climate policies should be left out of central banking altogether.
This is a thorny issue that some of Lagarde's colleagues do not believe belongs in a central bank's mandate at all.
The ECB said in a statement that interest rates would remain "at their present or lower levels" until inflation starts climbing towards its 2% target. The ECB said this programme would "run for as long as necessary" and end just before rates are hiked.
The euro hovered around $1.1085, against the US dollar on Thursday after the ECB's announcement.
"Governments with fiscal space should be ready to act".
Asked about a potential trade war between the USA and EU, Lagarde said she was "encouraged" by conversations between U.S. president Donald Trump and European Commission leader Ursula von der Leyen at Davos this week.
"We think the European Central Bank will cut interest rates at the end of the year when the review concludes, in order to underline its commitment to meeting the inflation target", said Paul Diggle, an economist at Aberdeen Standard Investments. It is the first such strategy review since 2003. "It will really encompass the entire communication approach when it comes to decision making, to publication, to the use of language that we have, to the outreach, to the engagement with all stakeholders".
"I'm not a despotic president of the Governing Council", Lagarde said.