The Governing Council of the ECB has introduced targeted refinancing operations and a negative interest rate on the deposit facility
In the euro area economic growth is still weak, intermittent and uneven among the member states; inflation continues to fall. The Governing Council of the ECB has taken steps to ease monetary conditions further and to support lending. The monetary policy measures have had an immediate impact on market interest rates, the exchange rate of the euro and the capital flows to many euro-area countries, including Italy. As the banks progressively make use of the new refinancing operations, a further expansionary effect may ensue.
In Italy the situation is still fragile, despite some encouraging signs
During the winter months economic activity reflected the contraction in energy production, which was due to some extent to the mild weather, and the continuing weakness of the construction industry. In May industrial production dipped unexpectedly throughout the euro area, partly owing to calendar effects. The continuing stagnation of economic activity is in contrast with the business and household confidence indicators, which have been picking up again since the spring. Business opinion surveys carried out in recent months show an improvement in investment plans, notably in industry.
Our projections point to hesitant growth, conditional on a strengthening of domestic demand
Our projections for the Italian economy in 2014-15 presented in this Bulletin suggest a moderate recovery, but not without considerable uncertainty. The gradual return to growth depends on the good performance of international trade and the revival of domestic demand, which will benefit from the diminishing restrictive effects of the fiscal adjustment of previous years, the fading of uncertainty regarding demand and the expansionary stance of monetary policy. Domestic demand should also draw strength from the support measures for lower incomes and the accelerated payment of general government commercial debts.
