christine lagarde : debate about the annual report introductory statement by ms christine lagarde, president of the european central bank, on the occasion of the presentation of the ecb annual report 2018 at the european parliament, brussels, 11 february 2020. * * * mr president of the european parliament, mr executive vice - president of the commission, honourable members of the european parliament, it gives me great pleasure to participate for the first time in a plenary session and to discuss your draft resolution on the ecb ’ s annual report for 2018. independence and accountability are two sides of the same coin for the ecb : one cannot exist without the other. this is why the ecb ’ s relationship with the european parliament is so important. the ecb ’ s annual report is a central element of this relationship, and parliament ’ s resolution and the subsequent feedback we publish are evidence of the good dialogue between our two institutions. having joined the ecb only recently, i read the draft resolution with particular interest. what struck me in particular was our shared assessment of many of the challenges facing the ecb and the euro area. indeed, the universal nature of these challenges underscores the need for our continued dialogue. today, i would like to focus on two of the overarching concerns that stand out from your draft resolution – the role of monetary policy in the current economic environment and structural challenges facing the euro area economy. the ecb ’ s contribution to the euro area economy euro area growth momentum has been slowing down since the start of 2018, largely on account of global uncertainties and weaker international trade. moderating growth has also weakened pressure on prices, and inflation remains some distance below our medium - term aim. against this background, the ecb ’ s governing council has acted in a determined fashion to achieve price stability in line with the ecb ’ s mandate. the ecb ’ s monetary policy since 2014 relies on four elements : a negative policy rate, asset purchases, forward guidance, and targeted lending operations. these measures have helped to preserve favourable lending conditions, support the resilience of the domestic economy and – most importantly in the recent period – shield the euro area economy from global headwinds. our policy stimulus has supported economic growth, resulting in more jobs and higher wages for euro area citizens. euro area unemployment, at 7. 4 %, is at its lowest level since may 2008. wages increased at an average rate of 2. 5 % in the first three quarters of

, central banks may be well advised to actively lean against the emergence of financial imbalances in order to mitigate systemic risk and the associated longer term risks to price stability and economic welfare. 6 at the ecb, we have always emphasised one tool which helps us maintain a medium to long - run orientation : the “ monetary analysis ”. the monetary analysis is one element of the ecb ’ s two - pillar framework – in addition to the economic analysis – for the regular assessment of risks to price stability. but we have always foreseen that monitoring monetary and credit developments is also part of an overall framework for addressing asset price misalignments. the analysis of low - frequency trends in money and credit developments has always been associated with the emergence of imbalances, because it allows us to assess risks to price stability well beyond the typical shorter term forecast horizons. this notwithstanding, for what concerns the monetary policy strategy, significant efforts are still to be undertaken in building up an appropriate analytical framework linking the various sources of systemic risk to economic outcomes over long policy horizons. this may robustify the ecb ’ s two - pillar monetary policy strategy to better cope with risks of highly uncertain, low probability but very costly events such as financial crises. a better understanding of the transmission channels that exist between the financial and the real sectors is therefore of the essence. while some headway has been made in studying non - conventional transmissions channels such as the risk - taking channel, other issues still see f. s. mishkin ( 2010 ) : “ monetary policy strategy : lessons from the crisis ”, paper presented at the ecb central banking conference, “ monetary policy revisited : lessons from the crisis ”, frankfurt, november 18 – 19. see, for example, borio, c. ( 2011 ) : “ central banking post - crisis : what compass for unchartered waters? ”, bis working paper no. 353, september. bis central bankers ’ speeches remain work in progress. 7 for example what is the influence of interest rates on risk tolerance? what is the interrelation between funding and market liquidity? what are the determinants of the leverage cycle, and which role is played by financial innovation? given the complexity of the issues involved one has to admit that the development of an operational framework linking monetary policy to the various forms of systemic risk is extremely complicated and poses severe intellectual challenges. financial stability risks may also arise from excessive monetary policy activism geared toward buying insurance against