During the Michel Camdessus Conference held at the IMF on September 20, Christine Lagarde returned to the mechanisms of transmission of monetary policy in a troubled period.
The message is that in a period that could be potentially unstable the central bank’s strategy must be an island of stability.
Moreover, the ECB’s efforts to anchor inflation expectations before, during and after the pandemic were effective. With unorthodox economic policies, one could have feared a form of distrust or divergence on inflation expectations. This would have had destabilizing effects whose macroeconomic impact would have been disastrous.
This has not been the case and this is to the credit of the actions of the central banks.
The watchword of the ECB, in the words of Christine Lagarde, is that of stability which should not be taken for rigidity. The ECB has learned from past events and shocks to understand the tormented environment and to be the pole of stability of the Eurozone…..
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Yet reading Christine Lagarde’s remarks leaves a feeling of unfinished business….