Thursday, April 12, 2018 /02:30 PM/ European Central Bank
Account of the monetary policy meeting of the
Governing Council of the European Central Bank, held in Frankfurt am Main on
Wednesday and Thursday, 7-8 March 2018
Review of financial, economic and
monetary developments and policy options
Financial market developments
Mr Cœuré reviewed the latest financial market
Since the Governing Council’s monetary policy
meeting on 24-25 January 2018, despite a short-lived and concentrated spike in
market volatility, valuations across broad asset classes had remained
consistent with continued optimism about the outlook for global growth.
Real long-term yields had risen by around 30 basis
points in the United States and 20 basis points in the euro area since the
start of the year. While part of this movement reflected adjustments in term
premia, it also likely reflected investors’ views on growth prospects,
including the expected impact of the fiscal stimulus package adopted by the US
Administration. Ten-year break-even inflation rates in the euro area had barely
moved since the start of the year. By contrast, in the United States they had
increased by more than 20 basis points. Markets had also reappraised the
near-term monetary policy outlook in the United States, in part reflecting
recent US employment and inflation data releases.
In the euro area, monetary policy expectations had
changed very little since the Governing Council’s January meeting. Market
participants’ expectations about the timing of a first 10 basis point hike in
the deposit facility rate had shifted out slightly.
Turning to equity markets, two underlying forces
were being exerted in opposite directions: expected earnings were continuing to
push stock valuations higher, while the increase in discount rates was pulling
stock prices lower on both sides of the Atlantic. Export-oriented countries and
sectors seemed to have been most affected by recent concerns over trade
relations. However, the turbulence in equity markets had not generated a more
general sell-off of other risk assets. Looking at asset swap spreads for debt
securities in Europe, only those of high-yield non-financial corporations
(NFCs) had increased somewhat. When looking at sovereign yield spreads
vis-à-vis Germany, the resilience had been notable considering the substantial
issuance activity seen recently.
The overall limited spillovers of recent price
movements in the equity markets to other markets could also be seen when
looking at a comparison of implied volatility across different markets, which
had remained at comparatively low levels, except in equity markets.
The observed jump in volatility in equity markets
had, in turn, been exacerbated by technical flows, such as those prompted by
investors following risk-parity and short volatility trading strategies.
However, the VIX volatility index had fallen back from the very high levels
reached in early February 2018.
As regards recent exchange rate developments, some
factors had likely been supportive of an appreciation of the US dollar, such as
positive inflation news, higher US yields and a surge in global uncertainty,
which, given the US dollar’s status as a safe haven asset, typically
contributed to a strengthening of the currency. Nevertheless, other factors,
which had been weighing on the US dollar in recent months, are likely to have
remained at work, such as improved economic growth expectations in the rest of
the world and greater borrowing needs in the United States to finance a
potential increase in the current account deficit.
The global environment and economic and monetary
developments in the euro area
Mr Praet reviewed the global environment and
recent economic and monetary developments in the euro area.
Regarding the external environment, global
activity and trade momentum remained sustained. Surveys pointed to steady and
broad-based global growth momentum at the start of 2018. The global composite
output Purchasing Managers’ Index (PMI) had increased slightly in February.
Global trade indicators pointed to sustained
growth around the turn of the year. Global goods import growth had slowed in
the fourth quarter but trade indicators were relatively buoyant, with the
global PMI new export orders series standing at a high level in January and
above its long-term average.
Despite the global upturn, underlying price
pressures had remained subdued. Annual consumer price inflation in the OECD
countries had ticked down slightly in January, to 2.2%, from 2.3% in December,
but core inflation had remained steady, with inflation excluding food and
energy standing at 1.8% in January.
Brent crude oil prices had decreased since the
January meeting but had increased slightly compared with the December
projection assumptions, standing at USD 65.4 per barrel on 6 March. Over the
same period, non-oil commodity prices had increased by 2.7%, largely driven by
rises in food prices and, to a lesser extent, in metal prices. The euro had
appreciated slightly against the US dollar and also in nominal effective terms
since the January meeting.
Turning to the euro area economy, incoming data
since the Governing Council’s January monetary policy meeting confirmed the
ongoing economic expansion. Favourable financing conditions and steady income
and profit growth, together with a robust labour market, continued to be the
key factors supporting aggregate demand. Risks to the growth outlook remained
broadly balanced. The positive cyclical momentum pointed to some upside risks
in the near term, while downside risks continued to relate to global factors,
including developments in foreign exchange markets and protectionism.
According to the latest data, economic activity
had remained robust in the fourth quarter of 2017. Eurostat’s flash estimate
had put euro area real GDP growth at 0.6%, quarter on quarter, in the fourth
quarter. The expansion had been broad-based across sectors. Real value added
had increased by 1.2% in the industrial sector (excluding construction), by
0.4% in the services sector and by 1.1% in the construction sector. Incoming
data since the January meeting also pointed to continued expansion in the first
quarter of 2018.
These positive developments were also reflected in
the March 2018 ECB staff macroeconomic projections for the euro area, which
projected real GDP growth at 2.5% in 2017, 2.4% in 2018 ,1.9% in 2019 and 1.7%
in 2020, representing an upward revision for 2018 compared with the December
2017 Eurosystem staff projections. The favourable growth outlook was supported
by a number of factors, including a continued global expansion, the ECB’s very
accommodative monetary policy stance, improving labour markets and diminishing
deleveraging pressures for NFCs and households. Nevertheless, real GDP growth
was projected to slow somewhat over the projection horizon as tailwinds were expected
to fade gradually.
Turning to price developments, according to
Eurostat’s flash estimate, annual HICP inflation had stood at 1.2% in February
2018, down from 1.3% in January. HICP inflation excluding food and energy had
been 1.0% in February, unchanged from January but slightly up from 0.9% in
December. Measures of underlying inflation remained low by historical
standards, although they had shown a marked improvement since the trough in
2016. Overall, these developments suggested that the strong cyclical momentum,
the ongoing reduction of labour market slack and increasing capacity
utilisation were translating into a steady, albeit slow, upward movement in
As regards wages, recent developments had
confirmed a gradual upward trend. This increase was mainly attributable to
higher contributions from wage drift, which usually reacted to cyclical
developments with a shorter lag than negotiated wages. According to the March
2018 ECB staff projections, growth in compensation per employee was expected to
pick up from 1.6% in 2017 to 2.7% in 2020.
In the March ECB staff projections, headline
inflation was expected to reach 1.7% in 2020, driven by underlying inflation,
after 1.4% in both 2018 and 2019. Compared with the December 2017 Eurosystem
staff projections, the outlook for HICP inflation had been revised down
slightly for 2019. The outlook for HICP inflation excluding food and energy was
unchanged compared with the December 2017 Eurosystem staff projections and was
expected to rise from 1.1% in 2018 to 1.5% in 2019 and 1.8% in 2020.
Inflation expectations, based on longer-term
market and survey-based measures, were largely unchanged since the Governing
Council’s January monetary policy meeting.
Financial conditions had tightened somewhat amid
volatility in equity and foreign exchange markets. At the same time, the
tightening observed over recent months had to be seen in the light of improving
economic conditions. The overall cost of financing for euro area firms had
increased somewhat, with both the cost of equity and the cost of market-based
debt having risen marginally.
Turning to money and credit developments, growth
in the broad monetary aggregate M3 had remained robust and within the narrow
range of 4.5-5.5% observed since the launch of the expanded asset purchase
programme (APP) in early 2015. In January 2018 the annual growth rate of loans
to NFCs had continued its upward trend, while the consolidated gross
indebtedness of NFCs had continued to fall. The annual growth rate of loans to
households had remained unchanged in January, supported by favourable borrowing
conditions and the expected further improvements in labour markets. At the same
time, growth in loans to households was being dampened by loan repayments.
Banks’ capital ratios had continued to strengthen in the third quarter of 2017,
reflecting mainly an increased positive contribution from recapitalisation.
Balance sheet de-risking had also continued to support capital ratios, as asset
quality had been improving in line with macroeconomic fundamentals and balance
Regarding fiscal policies, the March 2018 ECB
staff projections pointed to a mildly expansionary euro area fiscal stance in
2018, turning broadly neutral over 2019-20.
Monetary policy considerations and policy options
Summing up, Mr Praet remarked that financial
conditions had tightened somewhat amid volatility in equity and foreign
exchange markets. Nonetheless, borrowing conditions for firms and households
remained very favourable, in particular in the light of the improved
The March ECB staff projections pointed to
continued growth above potential, with an upward revision for 2018. Incoming
information confirmed the strong and broad-based economic upswing. As regards
inflation, the March projections confirmed the previous baseline outlook of
headline inflation increasing gradually to the Governing Council’s inflation
aim. However, measures of underlying inflation remained subdued and had yet to
show convincing signs of a sustained upward trend.
The cyclical momentum and the ongoing reduction of
economic slack confirmed the confidence that euro area HICP inflation would
converge towards the inflation aim. Yet inflation convergence was proceeding
only gradually and remained dependent on an ample degree of monetary
On the basis of this assessment, Mr Praet proposed
to convey the Governing Council’s improving confidence by removing the “easing
bias” attached to the APP, i.e. the reference to increasing the asset purchase
programme in terms of size and/or duration should the outlook become less
favourable, or should financial conditions become inconsistent with further
progress towards a sustained adjustment in the path of inflation. This was a
further step that followed earlier adjustments in the ECB’s policy stance,
namely the past reductions in the pace of purchases and the removal of the
easing bias on policy rates. At the same time, patience and persistence in
monetary policy remained essential for inflation pressures to build up.
Accordingly, Mr Praet also proposed reconfirming the earlier decisions on asset
purchases and policy rates.
Regarding communication, the Governing Council
needed to reiterate its confidence that the economic expansion would eventually
lead inflation to converge to its medium-term aim. It was also important to
highlight prudence, patience and persistence in monetary policy for inflation
pressures to build up and support the convergence of inflation to levels below,
but close to, 2% over the medium term, as well as to stress that the Governing
Council would continue monitoring developments in financial conditions with
regard to their possible implications for the medium-term outlook for price
Looking ahead, the Governing Council would
continue to assess progress towards a sustained adjustment in the path of
inflation. In line with its forward guidance on the APP, net asset purchases
would expire once the Governing Council judged that the criteria for a
sustained adjustment were met. The Governing Council’s assessment would
continue to be based on three criteria: first, convergence of headline
inflation to the medium-term aim; second, confidence in the materialisation of
the expected inflation path; and, third, resilience of inflation convergence
even after the end of the net asset purchases.
Beyond the horizon of the net asset purchases, the
monetary policy support still necessary for inflation to converge to the
Governing Council’s aim would continue to be provided by reinvestments of
principal continuing for an extended period of time and by policy rates
remaining at their present levels well past the end of the net asset purchases.
Governing Council’s discussion and
monetary policy decisions
Economic and monetary analyses
With regard to the economic analysis, members
broadly shared the assessment of the outlook and risks for economic activity in
the euro area provided by Mr Praet in his introduction. According to recent
data and survey results, growth momentum, supported by very favourable
financing conditions, had continued to be strong and broad-based. Looking
ahead, this expansion was expected to continue in the near term at a somewhat
faster pace than previously anticipated, as reflected in the March 2018 ECB
staff projections, in which real GDP growth in 2018 had been revised up
compared with the December 2017 Eurosystem staff projections, while the outlook
for growth in 2019 and 2020 was unchanged. The risks surrounding the outlook
for economic activity were assessed to have remained broadly balanced.
Regarding the outlook and risks for the external
environment, the latest indicators pointed to sustained momentum in global
activity and trade. The picture of a robust global economic expansion was also
reflected in the March 2018 ECB staff projections, with the outlook for global
activity being revised up for both 2018 and 2019. A major factor underlying the
upward revision was the impact of the additional fiscal stimulus in the United
States. However, the balance of risks to the global economic expansion was
still assessed to be tilted to the downside, as geopolitical uncertainties and
uncertainty regarding the policy outlook in some major economies – including
the risk of increased trade protectionism and the uncertain impact of the
United Kingdom’s withdrawal from the EU – continued to constitute downside
In the wake of recent statements by the US
Administration, members exchanged views on the risks arising from trade
protectionism, on which the Governing Council had reflected before. There was
widespread concern that the risk of trade conflicts, which could be expected to
have an adverse impact on activity for all countries involved, had increased.
The impact on the global economy and on the euro area would ultimately depend
on the scale of import tariffs imposed by the United States, as well as the
scope of any retaliatory measures. However, it was also cautioned that negative
confidence effects could arise. The impact of increased trade protection on
inflation was seen as being more ambiguous and uncertain.
Reference was also made to the risks associated
with volatility in global financial markets and foreign exchange markets. It
was highlighted that, although the past appreciation of the euro had so far not
had a significant negative impact on euro area external demand, developments in
foreign exchange markets continued to be a significant source of uncertainty
and a risk that needed monitoring.
Turning to euro area activity, members noted that
recent indicators had provided further evidence that the economic expansion was
strong and broad-based, and was continuing at a pace above current estimates of
potential growth. Euro area real GDP growth had increased by 0.6%, quarter on
quarter, in the fourth quarter of 2017, following an increase of 0.7% in the
third quarter. While the latest survey data were weaker, both the European
Commission’s Economic Sentiment Indicator and the PMI remained at historically
high levels. On the basis of developments in short-term indicators, near-term
real GDP growth could turn out to be somewhat higher than previously expected.
In terms of the main components of demand, private
consumption growth remained strong, supported by rising incomes and employment
and by historically low household savings. Business investment was
strengthening on the back of very favourable financing conditions, as well as
rising corporate profitability and solid demand. Housing investment had also
improved further over recent quarters. In addition, the broad-based global
expansion was providing impetus to euro area exports.
Members exchanged views about the euro area’s
potential growth rate and the remaining degree of slack in the economy. It was
noted that estimates from international institutions such as the European
Commission and the OECD suggested a closing of the euro area output gap in late
2017 or early 2018, while it was also acknowledged that there were significant
variations in the assessment of the output gap across countries. The view was
widely shared that there was considerable measurement uncertainty about the
degree of slack remaining in the labour market and in the economy as a whole.
A number of arguments were put forward suggesting
that greater slack might remain in the economy than indicated in the baseline
projections. It was recalled that measures of potential growth were typically
derived from capital and labour inputs, as well as estimates of total factor
productivity, all of which could be considered to some extent to have cyclical
components. If only supply shocks were considered when estimating potential
output, possibly resulting from the positive impact of past structural reforms,
there could be more spare capacity in the economy than was currently implied by
It was also recalled that favourable revisions had
already been made to estimates of both the non-accelerating inflation rate of
unemployment (NAIRU) and potential output. It was noted that the assessment of
slack in the labour market was in part based on broader measures of
unemployment, which incorporated involuntary part-time or discouraged workers,
putting additional downward pressure on wages. However, if there were
significant hysteresis effects, labour market slack may be less than suggested
on the basis of these broader measures. At the same time, it was remarked that
crisis-induced hysteresis might be reversed in a strong economic recovery.
A further risk discussed by members was that of a
more expansionary and procyclical fiscal policy over the projection horizon.
Overall, the risks to the euro area growth outlook were assessed to have
remained broadly balanced. On the one hand, the prevailing positive cyclical
momentum could lead to stronger growth in the near term. On the other hand,
downside risks continued to relate primarily to global factors, including
rising protectionism and developments in foreign exchange and other financial
Members emphasised that deepening Economic and
Monetary Union remained a priority and stressed the need to make progress on
the completion of the banking union and the capital markets union. More
generally, it was recalled that other policy areas needed to contribute
decisively to raising the longer-term growth potential of the euro area economy
and to reducing vulnerabilities, in order to reap the full benefits from the
ECB’s monetary policy measures. To increase the resilience of the euro area
economy, the implementation of structural reforms in euro area countries needed
to be stepped up substantially and a full and consistent implementation of the
Stability and Growth Pact and the macroeconomic imbalance procedure was
necessary, over time and across countries.
With regard to price developments, there was broad
agreement with the assessment presented by Mr Praet in his introduction. Annual
euro area HICP inflation had declined to 1.2% in February 2018, compared with
1.3% in January. The decline mainly reflected negative base effects in
unprocessed food price inflation. Annual rates of headline inflation were
likely to hover around 1.5% for the remainder of the year, inter alia on the
basis of current futures prices for oil. It was noted that in recent projection
rounds the outlook for headline inflation and for measures of underlying
inflation had been relatively stable, while the growth outlook had been
gradually revised upwards.
Members considered that measures of underlying
inflation in the euro area remained subdued, but were expected to rise
gradually over the medium term, supported by the ECB’s monetary policy
measures, the continuing economic expansion, the corresponding absorption of
economic slack and rising wage growth.
The stability of measures of underlying inflation,
despite the appreciation of the euro, was again highlighted in the discussion.
In this context, it was noted that non-energy industrial goods price inflation,
which was considered the component most sensitive to exchange rate movements,
had continued to increase despite the euro’s appreciation and, at 0.7%, stood
now above its long-term average. At the same time, it was remarked that recent
movements in the euro exchange rate seemed to relate more to relative monetary
policy shocks, including communication, and less to improvements in the
macroeconomic outlook for the euro area. This suggested that the exchange rate
appreciation could be expected to have a more negative impact on inflation. In
addition, even though the effect of the euro’s appreciation on inflation had
been limited so far, the pass-through could be stronger if the shocks turned
out to be permanent. Overall, there was broad agreement among members that
volatility in the exchange rate of the euro continued to be a source of
uncertainty, which required monitoring with regard to its possible implications
for the medium-term inflation outlook.
Members observed that wage dynamics were still
relatively subdued, as reflected in annual increases in compensation per
employee, which stood at 1.7% in the third quarter of 2017, although it was
expected that cost pressures should gradually increase as the economic
expansion continued and slack in the labour market was absorbed.
As regards recent developments in inflation
expectations, members noted that both market-based measures and survey-based
longer-term measures remained broadly stable. Expectations of inflation five
years ahead in the ECB’s Survey of Professional Forecasters (SPF) for the first
quarter of 2018 stood at 1.9% and the five-year forward inflation-linked swap
rate five years ahead currently stood at 1.71%. While this was still higher
than at the December 2017 monetary policy meeting, it was slightly lower than
the level observed at the time of the Governing Council’s January 2018 monetary
policy meeting. It was remarked that evidence from both the SPF and option
prices pointed to a shift towards higher inflation expectations since early
2015, after the start of the APP, with deflation scenarios clearly priced out.
With regard to the monetary analysis, members
concurred with the assessment presented by Mr Praet in his introduction. Broad
money (M3) had continued to expand at a robust pace, reflecting the impact of
the ECB’s monetary policy measures and the low opportunity cost of holding the
most liquid components. The gradual recovery in the growth of loans to the
private sector, visible since the start of 2014, was proceeding amid a further
pick-up in the growth of loans to NFCs and unchanged growth in loans to households.
The expansion in credit continued to be supported by very favourable borrowing
costs for firms and households across euro area jurisdictions.
Monetary policy stance and policy considerations
With regard to the monetary policy stance, members
widely shared the assessment provided by Mr Praet in his introduction that the
incoming information, including the new staff projections, corroborated the
strong and broad-based growth momentum in the euro area economy. This outlook
for growth confirmed the increased confidence that inflation would converge to
the Governing Council’s inflation aim of below, but close to, 2% over the
medium term. At the same time, measures of underlying inflation remained
subdued and had yet to show convincing signs of a sustained upward trend.
Overall, while the increased confidence called for a gradual adjustment in the
Governing Council’s communication, prudence, patience and persistence with
regard to monetary policy remained warranted for underlying inflation pressures
to continue to build up and support headline inflation developments over the
Members also broadly concurred with the assessment
by Mr Praet that financial conditions remained very favourable but had
tightened somewhat since the January monetary policy meeting on account of
weaker equity markets, an appreciation of the euro and an uptick in market
interest rates. It was remarked that the tightening in financial conditions
also had to be seen against the background of improvements in macroeconomic conditions
and, hence, may not necessarily imply a more restrictive monetary policy
stance. Moreover, the pass-through of the ECB’s monetary policy measures
continued to provide significant support to borrowing conditions for firms and
households. At the same time, some caution was voiced, as the more recent
developments in the euro exchange rate and in financial conditions in part
reflected changing perceptions about monetary and fiscal policies, domestically
and globally, as well as rising risks of protectionism and heightened market
sensitivity to communication, rather than further improvements in domestic
economic fundamentals. Against this background, developments in the exchange
rate and financial conditions required monitoring with regard to their possible
implications for the inflation outlook.
There was broad agreement among members that the
incoming information indicated ongoing progress on a sustained adjustment in
the path of inflation towards the Governing Council’s inflation aim. The view
was put forward that the Governing Council’s criteria for a sustained
adjustment in the path of inflation could be assessed as close to being
satisfied over a medium-term horizon. However, the broadly agreed conclusion
was that the evidence for a sustained rise in inflation towards levels
consistent with the Governing Council’s inflation aim was still not sufficient.
In this context, the point was also made that the assessment regarding the
achievement of a sustained adjustment in inflation was not binary, but rather
multifaceted and probabilistic in nature.
It was seen as encouraging that the latest ECB
staff projections appeared to remain consistent with inflation converging to
levels below, but close to, 2% over the medium term, also confirming the
outlook contained in previous projection exercises. Moreover, growth rates well
above current estimates of potential growth and the corresponding increase in
capacity utilisation were seen as strengthening confidence in the currently
expected inflation path.
At the same time, recent inflation outturns had
remained some distance away from the Governing Council’s inflation aim and the
incoming information continued to point to muted price pressures overall.
Moreover, while confidence in the inflation outlook had increased, it was still
seen as subject to a number of uncertainties, related mainly to the degree of
remaining economic slack and risks emanating from the global environment as
well as developments in foreign exchange and other financial markets.
With regard to the criterion of resilience, which
called for a self-sustaining adjustment in the path of inflation even after the
end of the net asset purchases, it was widely agreed that an ample degree of
monetary policy accommodation remained necessary to accompany the economic
expansion and for price pressures to continue to build up and support a rise in
inflation to the Governing Council’s medium-term inflation aim.
All in all, remaining uncertainties and muted
underlying inflation pressures called for caution and underlined the need to
maintain the prevailing policy posture of prudence, patience and persistence.
This suggested that the monetary policy decisions taken at the meeting in late
October 2017 on net asset purchases, reinvestments and policy interest rates
should be reconfirmed.
Against the backdrop of the ongoing improvements
in economic prospects and the corresponding greater confidence in the inflation
outlook, all members agreed with Mr Praet’s proposal to remove the “easing
bias” on the APP from the Governing Council’s forward guidance. It was recalled
that this language had been introduced at the time when net purchases had been
scaled back from a monthly pace of €80 billion to €60 billion and that the
economic environment had changed notably since then. In particular, its removal
was seen as justified as the economic expansion had become more robust and
scenarios of large negative economic surprises, leading to renewed deflationary
risks, had become less likely. In this sense, the removal of the APP easing
bias was consistent with the Governing Council’s data-dependent approach to
policy and communication.
As regards communication, there was broad agreement
with Mr Praet’s proposal to highlight increased confidence in the inflation
outlook while reiterating the importance of patience and persistence in
monetary policy to support inflation convergence towards levels below, but
close to, 2% over the medium term. It was widely stressed that the Governing
Council’s communication needed to reflect the progressively improving economic
environment and the corresponding greater confidence in the path of inflation.
Accordingly, a further adjustment in communication in the form of removing the
APP easing bias was seen as a natural step.
Members also agreed that alongside the elimination
of the easing bias, emphasis needed to be placed on the Governing Council’s
firm commitment to its price stability objective, particularly as inflation had
fallen short of its stated aim for a considerable period of time. Prudence,
patience and persistence remained warranted and the key elements of the
Governing Council’s forward guidance on policy rates and the APP needed to be
confirmed, including the open-endedness of the APP. In this context, it was
also remarked that the removal of the easing bias should not be misunderstood
as restricting the Governing Council’s capacity to react to shocks and
contingencies, if necessary.
At the same time, it was reiterated that the
monetary policy stimulus continued to be provided by the full set of policy
instruments, namely the level of policy rates, the net asset purchases, the
sizeable stock of acquired assets and the current and forthcoming
reinvestments, and the forward guidance on interest rates. Finally, there was
broad agreement on stressing the need for continued monitoring of developments
in the exchange rate and financial conditions with regard to their possible
implications for the inflation outlook.
Looking ahead, there was broad agreement on the
main elements put forward by Mr Praet in his introduction. The course of
monetary policy would remain firmly guided by the Governing Council’s
continuous assessment of the progress made towards a sustained adjustment in
the path of inflation based on the three criteria of convergence, confidence
and resilience. In particular, once the Governing Council judged that the
criteria for a sustained adjustment were met, the net asset purchases would
expire in line with the conditionality expressed in the forward guidance on the
It was recalled, as on previous occasions, that,
beyond the horizon of the net asset purchases, the monetary policy support
still necessary for inflation to converge to the inflation aim would be
provided by the stock of acquired assets, by reinvestments continuing for an
extended period of time, and by policy rates remaining at their present levels
well past the end of the net asset purchases.
Monetary policy decisions and communication
Taking into account the foregoing discussion among
the members, on a proposal from the President, the Governing Council decided
that the interest rate on the main refinancing operations and the interest
rates on the marginal lending facility and the deposit facility would remain
unchanged at 0.00%, 0.25% and -0.40% respectively.
The Governing Council continued to expect the key
ECB interest rates to remain at their present levels for an extended period of
time, and well past the horizon of the net asset purchases. The Governing
Council confirmed that the net asset purchases, at the current monthly pace of
€30 billion, were intended to run until the end of September 2018, or beyond,
if necessary, and in any case until it saw a sustained adjustment in the path
of inflation consistent with its inflation aim.
The Eurosystem would reinvest the principal
payments from maturing securities purchased under the APP for an extended
period of time after the end of the net asset purchases, and in any case for as
long as necessary. This would contribute both to favourable liquidity
conditions and to an appropriate monetary policy stance.
The members of the Governing Council subsequently
finalised the draft introductory statement, which the President and the
Vice-President would, as usual, deliver at the press conference following the
end of the current Governing Council meeting.
Meeting of the ECB’s Governing Council, 7-8 March
Mr Draghi, President
Mr Constâncio, Vice-President
Mr Villeroy de Galhau
* Members not holding a voting right in March 2018
under Article 10.2 of the ESCB Statute.
Mr Teixeira, Secretary, Director General
Mr Smets, Secretary for monetary policy, Director
Mr Winkler, Deputy Secretary for monetary policy,
Senior Adviser, DG Economics
Mr Hernández de Cos
Other ECB staff
Ms Graeff, Director General Communications
Mr Straub, Counsellor to the President
Mr Bindseil, Director General Market Operations
Mr Klöckers, Director General Economic
Developments, DG Economics
Mr Rostagno, Director General Monetary Policy, DG
Release of the next monetary policy account
foreseen on Thursday 24 May 2018.
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