Luxembourg Central Bank Statement

Author: | Published: 19 Oct 2018
Email a friend

Please enter a maximum of 5 recipients. Use ; to separate more than one email address.

Economic growth in the euro area remains strong and broad-based, although it has moderated in recent months. Investment has benefited from benign financing conditions, steady demand and improved corporate profitability. Employment gains and expanding household wealth have favoured private consumption. While global demand has supported euro area exports, uncertainties, notably related to the danger of protectionism and the risk of increased market volatility, have recently weakened net exports.

The inflation outlook has significantly improved, with adequately anchored longer-term expectations and lower uncertainties around the future path of inflation. Thanks to the supportive economic environment and accommodative monetary policy, underlying inflation is expected to increase towards the end of 2018 and then gradually rise, maintaining headline inflation at a level below but close to 2% over the medium term, in line with the Eurosystem's primary objective.

Against this background, in June 2018 the Governing Council of the European Central Bank (ECB) took a number of decisions concerning its standard and non-standard monetary policy measures.

First, the Governing Council decided to maintain the monthly purchase of assets under the Asset Purchase Programme (APP) at the pace of €30 billion until the end of September. In January, the monthly amount of net asset purchases had already been reduced from €60 billion to €30 billion.

The Governing Council announced that after September it expected to reduce the monthly pace from €30 billion to €15 billion until the end of December and that net purchases will then end.

Second, the ECB Governing Council agreed that the principal from maturing securities purchased under the APP would continue to be reinvested well past the end of net asset purchases and for as long as needed to ensure appropriate liquidity conditions and an ample degree of monetary accommodation.

Finally, the Governing Council maintained the interest rates on the main refinancing operations, the marginal lending facility and the deposit facility unchanged at respectively 0.00%, 0.25% and -0.40%. It also communicated that it expected to keep the key ECB interest rates at the current level at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.

At the institutional level, important steps have been taken to strengthen the Economic and Monetary Union (EMU). Further risk sharing among Member States requires further risk reduction, as well as enhanced prevention and correction of fiscal and macroeconomic imbalances.