Lagarde: Expectations Suggest ECB Won't Move In Tandem With Fed

Q: Are there any estimates of when slack will be absorbed? What is your view on the exit scenario and whether the ECB can move in tandem with the Fed?

• A: We assess that euro area economies will return to pre-pandemic conditions on average in the second half of 2022. There will be divergences with some economies lagging behind. It does not mean that all slack will be absorbed. Entering into the pandemic there was some slack.
  
• A: If you look at expectations in US and the Euro area, we are not on the same page. It indicates that we will not move in tandem with the Fed.

Q: Do you understand that negative interest rates upset people? Can you explain why negative rates are necessary?

• A: Based on our experience, negative rates are an effective tool for providing monetary accommodation. It provides additional stimulus to the euro area economy. Negative rates in the euro area are passed on to corporates in many cases. As far as households are concerned, it is 5% of deposits that have negative rates imposed. It is higher than that in Germany.
• I appreciate that people who are saving are not satisfied with being charged negative rates. But we have to look at the whole economy. Negative rates support the economy.