Only very subdued growth in sight 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. Share Email Twitter Facebook Linkedin Google+
The Eurosystem’s two-tier system for remunerating excess liquidity holdings 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. Share Email Twitter Facebook Linkedin Google+
Slightly negative central bank interest rates ease financial conditions Negative interest rates have been an integral part of the ECB's overall monetary accommodation for just over five years now. Research indicates that the advantages of slightly negative interest rates outweigh the disadvantages. Share Email Twitter Facebook Linkedin Google+
Outlook deteriorated rapidly – can this be turned around? 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. Share Email Twitter Facebook Linkedin Google+
The ECB's targeted longer-term refinancing operations have increased bank lending to the private sector Funding banks via longer-term refinancing operations has been a key feature of ECB monetary policy in recent years. With the latest of these, the ECB has succeeded in encouraging banks to increase lending to the private sector. Share Email Twitter Facebook Linkedin Google+
Low inflation and interest rates challenge central banks to review their monetary policy strategies Price stability has been pursued with different monetary policy strategies. A successful strategy increases the effectiveness of monetary policy. Share Email Twitter Facebook Linkedin Google+
Growth continues, outlook more moderate The fastest stage of growth in the euro area looks to have passed, but momentum remains strong. Uncertainty is being fuelled by protectionism and Italy’s domestic economic policy. Share Email Twitter Facebook Linkedin Google+
Monetary policy to be normalised gradually and in a predictable manner There are more question marks over monetary policy normalisation than there are over traditional monetary tightening. Share Email Twitter Facebook Linkedin Google+
TARGET2 balances – a truth more boring than fiction? The ECB’s Expanded Asset Purchase Programme has recently raised TARGET2 balances, but the reason for the increase is now different than during the sovereign debt crisis. Share Email Twitter Facebook Linkedin Google+
Reports of the Phillips curve's death are greatly exaggerated Euro area inflation has been slow in recent years. The way slow inflation was explained before the crisis has been challenged. Share Email Twitter Facebook Linkedin Google+
Reinvestments in ECB’s expanded asset purchase programme The reinvestment of maturing holdings, i.e. the replacement of maturing holdings with new ones, is gradually becoming an increasingly important part of an appropriate monetary policy stance. Share Email Twitter Facebook Linkedin Google+
Expansionary economic policy boosts growth The favourable outlook for the global economy is overshadowed by the threat of protectionism. In the euro area growth has picked up. Some of this acceleration is on a sustainable basis, but long-term growth is likely to remain slower than pre-crisis growth. Share Email Twitter Facebook Linkedin Google+
Post-crisis monetary policy modelling In the aftermath of the global financial crisis many central banks cut their policy rates close to zero and introduced non-standard monetary policy measures. The new situation has also presented a challenge for monetary policy modelling. Share Email Twitter Facebook Linkedin Google+
How has the feedback loop between banks and sovereigns changed since the crisis years? The bank-sovereign nexus has weakened, but we cannot consider it to be broken. Share Email Twitter Facebook Linkedin Google+
Growth picking up but inflation remains subdued The euro area economy is growing, supported by monetary policy. Confidence in the economy is strong, and investment and employment are both growing. On the other hand, there still remain problems from the financial and debt crises, and the pace of structural reform has slowed. Share Email Twitter Facebook Linkedin Google+
US Federal Reserve normalising its monetary policy stance The US economy has recovered from the financial crisis. Beginning in October, the Fed will reduce the holdings of securities on its balance sheet that it had purchased in its securities purchase programmes. Share Email Twitter Facebook Linkedin Google+
Changes in the economy challenge traditional methods of evaluating monetary policy A number of variations can be formed of the Taylor rule, all of which are simplifications. Monetary policy decisions cannot, however, be taken solely on the basis of simple rules. Share Email Twitter Facebook Linkedin Google+
Are market expectations in line with the forward guidance of the ECB? By promising low interest rates in the future, a central bank can provide stimulus for the economy today. The effectiveness of this kind of forward guidance can be assessed by the impact it has on market expectations regarding interest rates. Share Email Twitter Facebook Linkedin Google+
Euro area money markets undergoing huge changes Repo rates are at an exceptionally low level, and market participants are only just growing accustomed to the post-financial crisis environment. Share Email Twitter Facebook Linkedin Google+
Frequency of rising and falling prices in the euro area The flexibility of relative prices constitutes a key element of the dynamics of the economy. The same inflation rate may mask very different trends in relative prices. Share Email Twitter Facebook Linkedin Google+
Temporary factors have fuelled euro area inflation Inflation has recently accelerated largely due to the rise in the price of oil. When assessing the medium-term trend in inflation it is important to consider core inflation, which better reflects the euro area’s internal cost pressures. Share Email Twitter Facebook Linkedin Google+