ECB: Lagarde: Still Confident In The Economic Recovery

Q: 1. You mentioned headlines in the statement and GDP surprised lower this morning. Is the recovery delayed? 2. Are you worried about rising yields?

A: 1. There is recovery and we have to keep it at the front of our mind. We went from a very low 23 to almost double the growth in 2024. Granted its not at potential yet but it's certainly a recovery. 

• Given the job market and real income increase, we have good reason to believe consumption will pick up and support the recovery. We never talked about stagnation - Q4 was one quarter of weak growth but it's a different story over the whole year. Will the recovery be delayed, we shall see.

A: Whether you look at short or long end of curve it has increased, and its global, predominantly in the US but spilled over elsewhere. It's partly because of energy prices but also other reasons, possibly less downside risk of inflation in market perception, but largely US spillovers. 

• It doesn't stop our mon pol from transmitting quite materially looking at lower rates for corporates and mortgages. The consumer survey and the intention to invest clearly sees an added demand for the housing front.

Q: Can you give us any idea of your views on how the ECB will decide when we are there? So conceptually will you take the mid point of the staff forecasts? As we get closer to the level, will the reaction function of the ECB have to change?

A: Lagarde: When we get closer to neutral we will operate closely depending on staff research. We decide meeting by meeting on the basis of data so I can’t tell you if and when we arrive at this conceptual principle of the neutral rate and what we do afterwards. We will also be looking out of the window.