By Tom Fairless 

FRANKFURT -- The European Central Bank left its key interest rates unchanged Thursday as Christine Lagarde oversaw her first policy meeting as the bank's president, joining other major central banks, including the Federal Reserve, in pausing a wave of monetary easing.

ECB officials are waiting to see the impact of a package of interest-rate cuts and large-scale bond purchases unveiled in September. These were pushed through by former President Mario Draghi despite strong resistance from some of the central bankers that sit on the ECB's rate-setting committee who believe the policies hurt banks and subsidize profligate governments.

Ms. Lagarde has indicated that she wants to seek greater consensus among the region's central bankers, who are increasingly divided over the benefits of the bank's policies.

The export-oriented eurozone has been particularly impacted by tensions surrounding international trade and a slowdown in China. Recent data have suggested the eurozone economy might be bottoming out, but the near-term outlook remains unclear, with industrial output falling again in October, according to data published on Thursday.

The Federal Reserve also held interest rates steady on Wednesday after lowering rates at its three previous meetings to guard the U.S. economy against the effects of trade tensions. Fed officials indicated they are comfortable with leaving monetary policy on hold through next year while keeping an eye on those risks.

Investors will listen closely to Ms. Lagarde's inaugural news conference at 08:30 ET for an early glimpse into her leadership style and policy plans.

Ms. Lagarde, a lawyer and politician with no previous central banking experience, might hint at her approach to controversial policy tools championed by Mr. Draghi, such as negative interest rates and large-scale bond purchases, known as quantitative easing or QE.

Some ECB officials have expressed growing concern about the side effects of years of easy money. In in September, Ms. Lagarde acknowledged such concerns and signaled the ECB will conduct a lengthy review of its strategy and policy toolbox. The review is expected to take several months to complete but it could result in changes to the ECB's target of keeping inflation just below 2%, or set limits on the use of negative interest rates or large-scale bond purchases.

Investors had until recently expected the ECB to cut interest rates again next year, but those expectations faded as the divisions within the bank's rate-setting committee became clear.

Ms. Lagarde will likely bring a plain-speaking style to Thursday's news conference, analysts said, perhaps tweaking its length, the language used, or the way policy discussions are depicted. However, any changes to the carefully choreographed event are risky, as investors hang on central bankers' every word for clues as to their next moves.

"The impression Lagarde makes on Thursday is extremely important in the short run," said Carsten Brzeski, an economist with ING Bank in Frankfurt. "She was presented to investors as a great communicator."

Federal Reserve Chairman Jerome Powell, another lawyer, has also sought to bring a more plain-spoken approach to the Fed's communications since taking over from Janet Yellen last year. But global financial markets have seesawed as investors struggled to interpret the central bank's next moves.

Despite holding prominent roles at the IMF and as the French finance minister, investors know little about Ms. Lagarde's specific views on monetary policy.

If she provides greater clarity about her views, that would have a powerful impact in financial markets, said Frederik Ducrozet, an economist with Pictet Wealth Management in Geneva.

Write to Tom Fairless at tom.fairless@wsj.com

(END) Dow Jones Newswires

December 12, 2019 08:02 ET (13:02 GMT)

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