The ECB Expects Lagarde to Follow Draghi’s Path

The current president of the European Central Bank (ECB) Mario Draghi has been a dove mostly during his mandate. He has kept the Euro weak and has helped the Eurozone economy with the loose monetary policy. But he is leaving soon and the head of the International Monetary Fund (IMF) Christine Lagarde is taking his place.

There is some concern whether the ECB will keep the same policy when Draghi goes, but ECB governing council member Yannis Stournaras is calming the nerves as he suggests that Lagarde will follow Draghi’s path. Below are his comments:

• Lagarde will probably keep up ultra-loose policy and stimulus
• There are strong monetary, economic and financial arguments for that
• Benefits of taking action now exceeds to a large extent the costs
• Stimulus package last week was necessary because inflation remains very low
• Inflation forecasts also remain far below ECB’s objective
• Countries which have the means to add budget stimulus should step up to the plate

So, it seems like she will keep the “ultra-loose” monetary policy. At least, that’s what Stournaras suggests. Well, it’s not like she can do anything else right now, the economy of he Eurozone seems to be heading for recession with the manufacturing sector in doldrums. Such comments should keep the Euro bearish at least, so we will look for selling opportunities.