Growth message from ECB President Lagarde

European Central Bank President Christine Lagarde said that fiscal and monetary policies must be in harmony for sustainable growth. European Central Bank President Christine Lagarde said that the Fed’s tightening of monetary policy was affecting industrial production in the Eurozone as well as in the US. Speaking at the ASEAN+3 central bankers conference, Lagarde also stated that the short-term outlook was uncertain following a series of shocks that hit the global economy and that they would continue to see the effects of these shocks on supply and demand in the medium term. Emphasizing in her speech that monetary and fiscal policies must act in harmony for sustainable growth, Lagarde also warned that fiscal policies that stimulate demand could force central banks to tighten their monetary policies more than they normally would. “The dollar is being closely watched” European Central Bank (ECB) President Christine Lagarde said that inflation expectations should remain stable and that they should return inflation to the target. Warning that the outlook would remain uncertain for a while longer, Lagarde stated that the strengthening of the dollar had less of an impact on the Eurozone compared to emerging economies. Lagarde said, “Given this exceptional uncertainty, what we central bankers need to do is implement a monetary policy that anchors expectations so that they remain on target.” Emphasizing that the ECB does not have an exchange rate target, Lagarde said, “Obviously, we are monitoring the changes in exchange rates and are very careful about them, and we are particularly watching the appreciation of the dollar.” Although the Bloomberg Dollar Index has fallen in recent days, it has increased by 7 percent since the beginning of the year, while the Euro/Dollar has fallen by nearly 7.5 percent.