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Alexander Chute Economist
Tel: 902-424-5810Email: Alexander.Chute@novascotia.ca

September 07, 2017
MONETARY POLICY: EUROPE

At today’s meeting, the Governing Council of the European Central Bank(ECB) announced that the key ECB interest rates are unchanged, and that they are expected to remain at the current level for an extended period of time, well past the horizon of net asset purchases.  Monthly asset purchases will run at the current pace of €60 billion per month until December 2017 or beyond, until the path of inflation is consistent with the Governing Council's inflation aim. The Governing Council is prepared to increase the programme in terms of size and/or duration if the outlook becomes less favourable or if financial conditions deteriorate.

Euro area real GDP grew 0.6 per cent in Q2 after growth of 0.5 per cent in Q1.  Data points to broad-based growth across sectors and countries. Private consumption is supported through employment gains and increasing household wealth. An investment recovery continues to benefit from favourable financing conditions and improving corporate profits while global growth is supporting exports. The latest ECB projections are for slightly faster growth in 2017 at 2.2% with little change for 2018 and 2019 at 1.8% and 1.7% respectively.

Euro area inflation was 1.5 per cent in August and is expected to decline towards end of the year reflecting changes in energy prices. Underlying inflation has moved up moderately in recent months but has yet to show signs of a sustained upward trend as wage pressure remains subdued. The ECB projections are for euro area annual inflation to be 1.5% in 2017, 1.2% in 2018 and 1.5% in 2019, down from previous projection due to recent appreciation of euro exchange rate.

 


Sources:
European Central Bank



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