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Monetary policy shouldn’t be only game in town: ECB’s Lagarde

FRANKFURT, Feb. 11 (Xinhua) — European Central Bank (ECB) President Christine Lagarde said on Tuesday that monetary policy “cannot and should not be the only game in town,” arguing that fiscal and structural policies also have to play their part in upholding the effectiveness of ECB’s stimulus measures.

“The longer our accommodative measures remain in place, the greater the risk that side effects will become more pronounced,” Lagarde told the European Parliament’s plenary session in Strasbourg.

Lagarde said the ECB is fully aware that the low interest rate environment has a bearing on savings income, asset valuation, risk-taking and house prices and is closely monitoring the possible negative side effects.

Lagarde emphasized that fiscal and structural policies can boost productivity growth and lift growth potential, thereby underpinning the effectiveness of the ECB’s measures. “Indeed, when interest rates are low, fiscal policy can be highly effective,” she said.

This was Lagarde’s first address to the European Parliament’s plenary, where a draft resolution on the ECB’s Annual Report 2018 would be discussed.

Lagarde also stressed the need to think long-term and gear up on challenges, such as climate change, saying that “the ECB has already moved in this direction.”

She called for further efforts towards a “more complete” Economic and Monetary Union. The eurozone’s architecture has evolved substantially in recent years but “essential elements are still missing or incomplete,” Lagarde noted.

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