European Central Bank expected to announce strategic review into policy settings

The European Central Bank (ECB) will wrap up its first monetary policy meeting of the year in Frankfurt today. Analysts expect the bank will stay the course by keeping its key rate at -0.5% and maintaining its monthly bond purchasing program as it aims to boost inflation to 2%.

While investors are not expecting changes in policy, they will look for signals about the formal launch of a broader strategic review commissioned by new ECB President Christine Lagarde, which could last until the end of the year.

Among other things, the strategic review—the first since 2003—will assess whether the ECB’s inflation target of 2% remains valid given changes in the global economy.

The strategic review will serve as a primary test for Lagarde at a time when inflation, interest rates and economic growth are all lower than policy makers would like. A lawyer by training, Lagarde is generally perceived as the broker of compromises among central bankers rather than the being the primary architect of monetary policy.

While the strategic review could be formally launched today, a debate over the structure, timeline and agenda of the review will likely continue in the coming months.

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