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April 27, 2017MONETARY POLICY: EUROPE At today’s meeting, the Governing Council of the European Central Bank(ECB) announced that the key ECB interest rates are unchanged. Monthly asset purchases, as planned, have decreased to a pace of €60 billion per month. Assets purchases will continue until December 2017 or beyond if there is not a sustained adjustment in the path of inflation.
Euro area real GDP continued at a similar pace in Q1 with an increase of 0.5 per cent and the ECB has confidence that the expansion will continue and broaden. Monetary policy measures are supporting domestic demand and the deleveraging process. Employment gains, benefiting from previous labour market reforms, are supporting disposable income and consumption. A stronger global recovery and increasing global trade will benefit the euro area expansion. Growth continues to be dampened by the sluggish pace of structural reforms and global risks are to tilted to the downside.
Annual inflation was 1.5 per cent in March, down from 2.0 per cent in February reflecting changes in energy prices but also unprocessed food and services. Inflation is likely to be up in April and continue around current levels until end of the year. Unutilised resources still weigh on domestic wages and prices and thus underlying inflation remains low and is only expected to rise gradually over medium term.
Sources:
European Central Bank
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