Faced with a sharper-than-expected slowdown in growth in the euro area, the European Central Bank (ECB) unanimously adopted new accommodative monetary policy measures on Thursday 7 March, announcing in particular that it would not raise its key interest rates before 2020.
"We have decided to keep the key ECB interest rates unchanged. We expect them to remain at their present levels at least through the end of 2019", said the Institute's President, Mario Draghi, adding that this forward guidance on interest rates would be maintained as long as the inflation path has not returned to a level close to, but below, 2% (1.5% in February).
The key ECB interest rates are as follows: 0.00% for the main refinancing operations, 0.25% for the marginal lending facility and -0.40% for the deposit facility.
As at the last Governing Council decision meeting (see EUROPE 12179/20), the ECB considered that the downside risks to growth in the euro area were in the majority.
"This is not common", Draghi noted, mainly attributing the persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets.
The new growth forecasts unveiled by the monetary institute on Thursday show a marked moderation in the pace of economic expansion in the euro area. Growth was revised "down substantially" for 2019, to 1.1% of GDP, and "slightly" for 2020, to 1.6% (1.5% in 2021).
With regard to price increases, the ECB now expects the following path to be revised down compared with previous forecasts: 1.2% in 2019, 1.5% in 2020 and 1.6% in 2021.
Nevertheless, the Governing Council remains confident in the euro area economy's ability to weather this prolonged period of uncertainty, with Mr Draghi pointing to the existence of factors that are conducive to stimulating inflation, such as continued wage increases, sustained consumption and flexible financing conditions.
In addition to steering interest rate expectations, the ECB decided to continue to reinvest, until the key interest rates are raised again, the amounts of maturing bonds that had been acquired as part of the massive repurchase of mainly public securities ('quantitative easing' or QE).
Most importantly, a new targeted medium-term bank refinancing operation ('TLTRO-III') was launched on Thursday to guarantee financial institutions favourable refinancing conditions. This operation will take place between September 2019 and March 2021 and will cover securities with a maturity of two years. (Original version in French by Mathieu Bion)