ECB Economic Bulletin, No. 2 - 2019

Based on a thorough assessment of the economic and inflation outlook, the Governing Council took a series of monetary policy decisions at its monetary policy meeting on 7 March. The weakening in economic data points to a sizeable moderation in the pace of the economic expansion that will extend into the current year, even though there are signs that some of the idiosyncratic domestic factors dampening growth are starting to fade.
The persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets appears to be leaving marks on economic sentiment. Moreover, underlying inflation continues to be muted. The weaker economic momentum is slowing the adjustment of inflation towards the Governing Council's aim. At the same time, supportive financing conditions, favourable labour market dynamics and rising wage growth continue to underpin the euro area expansion and gradually rising inflation pressures.
Against this background, the Governing Council decided to adjust its forward guidance on the key ECB interest rates to indicate its expectation that they will “remain at their present levels at least through the end 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”, as well as to reiterate its forward guidance on reinvestments. Furthermore, the Governing Council decided to launch a new series of targeted longer-term refinancing operations (TLTRO-III) and to continue conducting all lending operations as fixed rate tender procedures with full allotment at least until the end of the reserve maintenance period starting in March 2021. These decisions were taken to ensure that inflation remains on a sustained path towards levels that are below, but close to, 2% over the medium term.

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