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 aim of the two-tier system for remunerating excess liquidity holdings is to promote monetary policy transmission via banks to firms and households. The system is part of the ECB Governing Council’s broad package of monetary accommodation.

Global growth has slowed substantially during the course of the current year. One cause of this has been the trade war between the United States and China. Brexit, too, has added to the uncertainty surrounding the future course of the economy.

Euro area productivity growth has been slowing since the turn of the millennium. Economic policy that bolsters stability in the economy is a vital factor for productivity growth.

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.

The Bank of Finland organized an international research conference to discuss two key topics in particular: the challenges of monetary policy and the future of European Monetary Union.

Finland’s economic growth will be slower during the next three years. Growth has also slowed in the euro area and elsewhere around the world. However, there are still possibilities for growth in the Finnish economy.

The economic outlook for the euro area has deteriorated rapidly. The impact of Brexit on Europe as a whole is hard to predict. Another factor overshadowing the global economy is the trade dispute between the USA and China.