Factbox: ECB President Lagarde's interpretation of the bank's mandate

FRANKFURT (Reuters) - The following are key comments by ECB President Christine Lagarde on her interpretation of the ECB’s mandate.

FILE PHOTO: FILE PHOTO: European Central Bank (ECB) President Christine Lagarde gestures as she addresses a news conference on the outcome of the meeting of the Governing Council, in Frankfurt, Germany, March 12, 2020. REUTERS/Kai Pfaffenbach/File Photo/File Photo

For an Insight on Lagarde push for greater emphasis on social issues like climate change and inequality, click on: here


“In addition to the narrow angle from which we have historically looked at monetary policy over the course of previous decades, we need to enlarge the horizon and be courageous in tackling some of these issues, although they are not the traditional areas that monetary economists look at.

“We have a primary mandate, which was set in the Treaty, by the founding fathers and mothers of the European Union... That treaty says very clearly: primary mandate is price stability... We should re-examine how we deliver on a mandate that is set by the treaty that we’re not proposing to change under this strategy review simply because we are mindful of what is feasible and what belongs to others.

“There are issues that actually impact the work that we have to do that is defined by the Treaty, which were not sufficiently considered at the time. Climate change was not lingua franca in those days.

“I share with you the priority of dealing with the catastrophic potential outcome of not paying attention to climate change as we should. We will be putting that on that table.

“Let’s agree on the facts, then we have the right tools then hopefully we can convince all who challenge it or who don’t see it as clearly in the mandate of the central bank, that actually taking that on board is part of our duty. Because it impacts on price stability, numbers one, and number two, it’s an issue of good risk management. Because if the market is deficient in pricing risks, then should we just follow the market when it is wrong? Or should we not?


“Everybody must step up to address what is the main risk of the 21st century. If we don’t do so now, it will no longer be possible for us to tackle climate change. It will be too late! Every one of us, no matter where we are, would be to blame if we didn’t ask ourselves: what do I need to do to play my part? What can I do? My instinct tells me that we can do more than we think.


“Research on natural disasters suggests that climatic events could make inflation more volatile, especially in the short run. And over time, mitigation strategies such as carbon taxes could have significant and persistent effects on relative prices. In other words, bringing climate change more fundamentally into our analysis and strategy is not “mission creep”: climate change is also a price stability risk.

Reporting by Balazs Koranyi