MNI PREVIEW: Policy Review In Focus For Lagarde's 1st ECB Meet

By Luke Heighton

     FRANKFURT(MNI) - Christine Lagarde is not expected to oversee changes in

monetary policy in her first meeting as president of the European Central Bank

on Thursday, as September's easing package is given time to prove itself, but

could announce the commencement of a strategic review of monetary policy.

     A focus for the review will be ECB's inflation target, which has been set

at "below, but close to, 2% over the medium term" since the last such exercise,

in 2003. It would come at a time when central bankers including Lagarde

increasingly call for an increased role for fiscal policy in maintaining price

momentum, if the benefits of extraordinary monetary policy are to continue to

outweigh negative side-effects.

     The public nature of the disagreements surrounding September's announcement

of the re-launch of quantitative easing, a cut in key interest rates, the

introduction of tiering and the change in forward guidance may shape questions

at the press conference after the meeting, providing an early test for a

president without previous central banking experience.

     --HAWKS

     There have been suggestions that Chief Economist Philip Lane could join the

Lagarde and Vice-President Luis de Guindos in facing the press, but this may be

a risky message for her to send.

     Lagarde has indicated a willingness to listen to all parties within the

Governing Council, including hawks who complained of being marginalised under

her predecessor Mario Draghi.

     ECB sources have told MNI that the ECB could be on hold for much of next

year, even as the hawks call for September's measures to be rolled back when

possible.

     Lagarde has also signalled a belief that the ECB should incorporate

awareness of climate change into its economic forecasts and investment policy.

     ECB staff macroeconomic projections, also scheduled for release on

Thursday, are unlikely to show any major improvement or deterioration in growth

and inflation forecasts.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

[TOPICS: M$X$$$,MT$$$$,MX$$$$,M$$EC$]