The last strategy review addressed an era where inflation was hard to tame, not hard to stimulate. Since then, technology, globalisation, even European integration have added an efficiency, but have undermined the inflationary pressures. How can this strategic review address this fundamental shift? What yardsticks do you think personally should be assessed first for their relevance in today's era? The follow-up question: we can safely assume by now that ultra-low yields have not been enough of an incentive for governments, for fiscal spending for growth. Is there something more efficient, different that the ECB could do or influence in order to catalyse fiscal expansion? Or would it be considered too political? How central do you expect this issue to be in this strategic review?
President Lagarde: You're completely right in that the situation has completely changed from 2003. We published a study just before December that takes stock of the last 20 years of euro use and implementation and monetary policy delivery. For ten years, the goal was to fight inflation, because inflation was way too high. Then the financial crisis was the pivotal point at which eventually inflation was too low. It's been a reversal of the situation and requires in my view that we actually look at the strategy very carefully to see how effective we can be in view of the change of circumstances, some of which are structural factors that are here with us to stay. When you look at the ageing population, when you look at the low productivity, these are probably going to be with us for a long time. That justifies fully the need for a strategy review. We cannot operate as we did back in 2003 – which doesn't mean to say that we have to necessarily change this, that or the other. But we have to look comprehensively at the effectiveness of our monetary policy. One thing that I know is central and anchored in our considerations will be the mandate that we are given under the Treaty, which is that of price stability. That's the primary one.
On fiscal expansion, I would first of all observe that at the euro area level, there is a very mild fiscal expansion as we speak. I would also observe that two of the countries that have fiscal space, and I can think… You know who I am talking about. Two of those countries are now seriously looking...One has certainly gone pretty way out in order to explore how to expand more fiscally with their respective domestic budget. There's progress. We just need to all keep at it, not because I want to influence fiscal policy. It's for the budget holders to decide. It's for the authorities that have competence in that respect to decide, but simply because a good fiscal support would give much more effect to our monetary policy. That's why I think it's important that they do.
ECB President Christine Lagarde explained the Governing Council’s latest monetary policy decisions and answered questions from journalists at a press conference on 23 January 2020.
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