Euro Area Economic Outlook and the ECB’s Monetary Policy

Abstract

Materialization of the downside risks to economic growth in the euro area. Risks for the future remain on the downside. The evolution of inflation has been in line with expectations, with a further decline in headline and core inflation. Risks to inflation remain balanced. A further tightening of financial conditions, higher than expected, confirming a very strong pass through of our monetary policy. Moreover, a significant part of the pass through of monetary policy tightening is still pending. Based on this assessment, the ECB’s GC decided to keep the three key ECB interest rates unchanged and it considered that those levels, maintained for a sufficiently long duration, will make a substantial contribution to return inflation to its 2% target over the medium term.