Lagarde Says ECB Policy Has Alleviated, Not Deepened Inequality

The European Central Bank’s monetary policy has helped lessen inequality during the pandemic, President Christine Lagarde said.

Policy makers’ efforts to lift inflation in the 19-nation euro area through large-scale asset purchases, long-term loans and record-low interest rates has supported the economy and underpinned the labor market, she said on Friday. And “contributing to more jobs has a direct impact on reducing inequality.

Lagarde also said the coronavirus crisis “will create inequality,” especially for low-income workers and young people, “and we have to look at it very carefully.”

The ECB President’s remarks come a few days after Federal Reserve Chair Jerome Powell said that the benefits of the U.S. economic recovery are cutting hard along lines of race and income. At the same time, the Bank of International Settlements’ General Manager Agustin Carstens argued Thursday that central banks don’t have the tools to tackle inequality on their own, and must be aware their actions can also risk exacerbating the problem by creating financial imbalances.

Lagarde acknowledged the argument that asset-purchase programs have boosted financial assets held by the wealthy, but ultimately defended the ECB’s policies for contributing to growth. She also said her institution doesn’t share the same scope as the Fed to focus on inequality.

“We’re not operating with the same mandate as the Fed. The Fed has a dual mandate, we have a single mandate” of price stability, she said. “Clearly the fiscal authorities are the ones whose job it is to address those questions and actually have the tools to address the distributional impact.”

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