FRANKFURT, Sept 11 (Reuters) – The European Central Bank left interest rates unchanged on Thursday as expected but offered no clues about its next move, even as investors continue to bet that more support will be needed as inflation dips below target next year.
Following are highlights of ECB President Christine Lagarde’s comments at a news conference after the policy meeting.
IMPACT OF SLOWING U.S. ECONOMY?
“On the U.S., I think there are two stories… the stories of the slight decline, possible more decline. But you also have the story of productivity, of artificial intelligence, of the magnificent seven.” “So I think we have to bring all of it together and see what kind of spillovers there will be to our economies as a result.”
NEITHER HAWK NOR DOVE
“I remind you that I’m neither hawk nor dove. I’m owl for our Bulgarian colleagues.
“You know, when I first took this job, I was instantly asked as to whether or not I was a hawk, the hard liner, or a dove, the softer liner. And I said neither. I’m an owl, because I want number one to see everything that happens around me.
“It’s not 360 degrees, but it’s a pretty large diameter that I can look at.”
TPI NOT DISCUSSED
“TPI (Transmission Protection Instrument) was not discussed at all in the course of our Governing Council today.”
INTEGRITY OF DATA
“We are very lucky so far, and I hope that stays the same, to have data of which the integrity is not challenged.
“So the data that we receive from the statistics office, offices of the member states that are compiled by Eurostat, despite the trauma that we have seen a few years ago out of Greece, but despite that one, which I think has been a lesson for all of us, I think the integrity of the data that we use is very high, and this is valued by all of us.”
ASKED ABOUT MARKETS IN FRANCE
“I’m not commenting on any particular country, but suffice to say that we always monitor market developments and euro area sovereign bonds are orderly and are functioning smoothly with good liquidity. That’s what we see.
“Our focus is, as you know, price stability, but we need financial stability for that, and it requires a well functioning monetary policy transmission mechanism and we believe that we have all the necessary tools if needed, should that transmission, not prove efficient throughout the entire euro area.”
MORE ON THE BALANCE OF RISKS
“If you walk back to June, we had a highly uncertain situation. It was post April 19, sure, but it was pre-July, and certainly pre-August 21 when a deal was agreed…
“Two things have clearly moved out of our radar screen when it comes to downside risk. The first one is the risk of European retaliation that was factored into our June projection … and the second thing is the (trade) uncertainty.”
ON INFLATION
“The disinflationary process is over.”
“We continue to be in a good place, but we are not on a predetermined path, and we will take stock meeting by meeting … in order to make sure that we stay in a good place.”
UNANIMOUS DECISION
“I never want to overstretch the general agreement in the room, but we had a unanimous decision by the Governing Council today to leave all three interest rates unchanged.
“And we discussed, of course, the projections. We discussed the risk, but I think that what I have just formulated for you is something that was agreed unanimously around the table.”
NOT PRE-COMMITTING
“We will follow a data dependent meeting-by-meeting approach to determining the appropriate monetary policy stance.”
“We are not pre-committing to a particular rate path, and in any case, we stand ready to adjust all of our instruments.”
“We continue to be in a good place.”
MORE BALANCED GROWTH RISKS
“Risks to economy growth have become more balanced, while recent trade agreements have reduced uncertainty, a renewed worsening of trade relations could further dampen exports and drag down investment and consumption.
“A deterioration in financial market sentiment could lead to tighter financing conditions, greater risk aversions and weaker growth.
“By contrast, higher-than-expected defence and infrastructure spending, together with productivity enhancing reforms, would add to growth.
“An improvement in business confidence could stimulate private investment. Sentiment could also be lifted and activities spurred if geopolitical tensions diminished, or if the remaining trade disputes were resolved faster than expected.”
ON THE ECONOMIC OUTLOOK
“Higher tariffs, a stronger euro and increased global competition are expected to hold growth back for the rest of the year. However, the effect of these headwinds on growth should fade next year.”
(Reporting by Reuters Global News Desk)
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