Following several quarters of higher than expected growth, incoming information since the Governing Council's meeting in early March points towards some moderation, while remaining consistent with a solid and broad-based expansion of the euro area economy. The risks surrounding the euro area growth outlook remain broadly balanced, but risks related to global factors, including the threat of increased protectionism, have become more prominent. Overall, the economy's underlying strength continues to support the Governing Council's confidence that inflation will converge towards its inflation aim of below, but close to, 2% over the medium term. At the same time, measures of underlying inflation remain subdued and have yet to show convincing signs of a sustained upward trend. In this context, the Governing Council will continue to monitor developments in the exchange rate and other financial conditions with regard to their possible implications for the inflation outlook. Overall, an ample degree of monetary stimulus remains necessary for underlying inflation pressures to continue to build up and support headline inflation developments over the medium term.
On the global level, survey indicators remain generally consistent with a steady economic expansion. However, the tariff announcements in recent weeks represent a risk to global momentum. Global trade indicators were mixed but on the whole signal some deceleration at the start of the year. Furthermore, geopolitical risks have led to a pick-up in oil prices.
Euro area sovereign bond yields have declined and sovereign bond spreads have decreased, the latter reflecting an improvement in country-specific macroeconomic fundamentals in the light of the ongoing economic expansion. Similarly, euro area equity prices have risen despite some episodes of heightened volatility. In foreign exchange markets, the euro has remained broadly unchanged in nominal effective terms.
