No one knows exactly what the economic situation Christine Lagarde will inherit in the evening of October 31, 2019, when Mario Draghi will transfer the ECB's keys to her, eight years after having recovered them from Jean-Claude Trichet. But chances are that it will not be particularly successful in Europe. The deterioration in growth indicators, particularly in Germany, has forced the central bank to act swiftly. The meeting in Frankfurt on July 25 showed that the euro area monetary policy pilots have chosen not to lower rates immediately: the three key rates therefore remain unchanged. On the other hand, the Governing Council adds that these rates will remain at these levels "or lower at least until the end of the first half of 2020", which introduces a new horizon and the possibility of a lowering. Another innovation is that the central bank no longer cites the 2% target but specifies that rates will be adjusted as long as necessary to ensure that inflation converges with the medium-term objective.
The Governing Council also stressed the need to adopt a "very accommodating" bias for an extended period of time and stands ready to "adjust all its instruments" to ensure that inflation will tend towards the target in a sustainable way. It also mandated the bank's committees to examine several options to achieve its objectives. In particular, the possibility of "tiering", a system of degressive rates, already in force elsewhere and which would make it possible not to penalize commercial banks overseas.
"It now seems more obvious that the September meeting will not be the scene of the announcement of a single measure, but of a package of measures," says ING economist Carsten Brzeski after the decision. Three key elements have changed in communication, says the specialist. First, the mention of lower rates. Then, the introduction of new terms such as the commitment to act if inflation continues to miss the target, or the mention of the possibility of adjustment of "all instruments". Finally, the ECB used the "magic words", according to Brzeski: the examination of different EQ options by the internal committees. Even before the press conference, "it is clear that today's meeting was the last stop with new ECB action".