There was a shift in the global economic cycle towards slower growth during the first half of 2018. The trade war and Brexit increase the risk of recession.
The trade war has significantly weakened the global economy
The Eurosystem’s two-tier system for remunerating excess liquidity holdings
Slightly negative central bank interest rates ease financial conditions
Euro area productivity growth could slow further in the event of a downturn
How can we avoid a negative equilibrium of low growth and low inflation?
Slower-than-target inflation and a persistent decline in inflation expectations are key challenges for monetary policy. A negative equilibrium of prolonged low inflation and zero interest rates would fundamentally weaken monetary policy’s room for manoeuvre in balancing fluctuations in the economic cycle.