The President of the European Central Bank (ECB), Mario Draghi, once again called for prudence, patience and perseverance in monetary policy, stating on Thursday 26 July that it was too early to cry victory in the challenge of establishing inflation at a level close to but below 2%.
Economic growth in the Eurozone remained solid, even though some moderation in its vigour was observed at the end of 2017. Upwards and downwards risk are still globally balanced, the production of wealth should remain broadly spread across sectors and countries of the Eurozone, Draghi said, following the meeting of the Governing Council.
On inflation, the ECB President said that “uncertainty (…) is receding”, so much so that inflation is expected to increase even though underlying inflation (not including energy and food prices) is still low overall.
Even so, the ECB is not changing tack after the June announcements on the progressive normalisation of its accommodative policy, which must continue to be substantial to face contingencies (see EUROPE 12041).
Up to the end of September, the monetary institute will continue to acquire mainly public shares at a rate of €30 billion per month in the framework of its 'quantitative easing' mass buyback operation. If the data it receives confirm its medium-term inflation perspectives, the pace of purchase will fall to €15 million until the end of December, when net purchasing will end.
Additionally, the ECB's forward guidance on the key interest rates remains the same. This process is “very effective. At this stage, we don't see a need to modify or add forward guidance on rates”, Draghi stressed.
These rates (0% for principal refinancing operations, 0.25% for the marginal loan facility and -0.4% for the deposit facility) of the ECB will therefore remain at current levels at least until summer 2019 and until the inflation trajectory is sustainably in line with the monetary Institute's principal mission.
Commercial tensions. When asked about transatlantic commercial tensions (see other article), the former governor of the Bank of Italy said that the direct impact of the tariff measures already taken was “limited”. However, a “trade war would create an entirely different climate”, particularly by weighing heavily on confidence, he said. (Original version in French by Mathieu Bion)