As part of our monetary policy strategy review we adopted a new symmetric 2% inflation target. One year on, we examine how the strategy review has helped anchor financial analysts’ inflation expectations. We also show that recent policy normalisation is grounded in our strategy.
The coronavirus (COVID-19) pandemic led to one of the largest contractions in global output since the Second World War and substantially affected global trade. In most euro area countries, trade in goods and services fell significantly in 2020 and current account balances responded strongly to the changing economic and social environments. While the aggregate current account balance of the euro area (measured as a share of GDP) did not change significantly, substantial shifts occurred in the balances of individual euro area countries (Chart 1). For example, Cyprus, France, Greece and Malta recorded considerable deteriorations in their current account balances. By contrast, Ireland and Lithuania recorded improvements in their current account balances in the second half of 2020.
Chart 1. Euro area current account balance Percentage of GDP; dashed lines show the euro area countries recording the largest surplus and deficit for each quarter
The Europa Open Air concert will take place again on Thursday, 25 August, after a three-year break. Held on the banks of the Main river, it is one of the most renowned concerts in the Frankfurt area and is jointly organised by the European Central Bank (ECB) and the Hessischer Rundfunk orchestra, Frankfurt Radio Symphony.
The theme of the event is “celebrating Europe”. The programme features popular classics by European composers such as Giuseppe Verdi, Frédéric Chopin, Claude Debussy and Mieczys?aw Weinberg, performed by Frankfurt Radio Symphony. The evening will start with a performance from Hessischer Rundfunk’s big band.
“This event, at a time when there is once again a war on European soil, should serve as a reminder that we want to live in a society that is free and open, in which solidarity prevails over aggression. Europe is what unites us,” said ECB President Christine Lagarde.
The concert will be broadcast live on German TV and radio and over the...
8 August 2022
We’ve seen domestic consolidation, but not so much cross-border consolidation. How keen are you to see cross-border deals in the banking union?
We are keen to see deals that increase resilience. From the perspective of the European Central Bank (ECB), consolidation within the euro area is a form of European integration. Of course, the European market still has national borders, which we take into account because we supervise both the individual banks and the entire group. The European banking market is much more resilient than it was ten years ago, but it has still not returned to the level of integration it had in 2008.
One of the structural challenges facing European banks is their lower profitability compared with, for example, US banks, or even – to a lesser degree – UK banks. So further integration clearly offers potential gains in efficiency.
We are in the process of integrating regulation, to align it at European level. Of course,...
16 September 2021
Today we're in conversation with Christine Lagarde, who is the President of the European Central Bank.
As we now look at the post-COVID environment, what would you say is the situation in Europe? Is Europe recovering more rapidly, or not quite as rapidly as you'd thought, from the COVID pandemic?
Actually, Europe is recovering more rapidly than we had anticipated. We have, as a result of that, significantly upgraded our projections. Our projection for this year is plus 5%, so it's a significant upgrade, plus 4.6% next year and back to pre-COVID type of growth subsequently. But this year it’s certainly going faster than we had thought – to the point where we will have recovered to pre-COVID-19 levels before the end of the year, 2021. We had anticipated earlier on that it would be early 2022 at best; it's now going to be in 2021.
Well, are you worried about the Delta variant impacting what you've just said, or the so-called Mu...
Frankfurt am Main, 15 September 2021
Sovereign bond markets in the euro area and the United States have taken a remarkable turn over the summer.[1] Despite the ongoing strong recovery from the crisis, the revival of inflation and surveys signalling firming expectations among market participants that central bank asset purchases globally may gradually slow in the near future, sovereign bond yields have declined and partly reversed the upward trend observed in the beginning of the year.
In my remarks today I will discuss the drivers of recent bond market developments and zoom in on two factors that may currently pull yields lower: one relates to concerns regarding the spread of the Delta variant, the other is monetary policy. While the first factor may be puzzling, the second is less so.
On July 8, the new monetary policy strategy of the European Central Bank (ECB) was published after an extensive process. Apart from the workstreams, the ECB and national central banks across the euro area hosted various listening activities. In this context, the IMFS conference "The ECB and Its Watchers" in September 2020 served as a listening event with academia. The conference contributions, including videos of the panels and discussions are presented in an IMFS Interdisciplinary Study (free print version available on request).
In this webinar, Philip R. Lane will give a short overview about the outcome of the monetary policy strategy review, and answer questions from the audience.The discussion will be moderated by Volker Wieland.
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Frankfurt am Main, 14 September 2021
Sentiment in the euro area is brightening. Consumers and firms are becoming more upbeat about the future. At the same time, consumer prices are increasing at a faster pace. In August, inflation in the euro area stood at 3%. In Germany, the inflation rate, as measured by the Harmonised Index of Consumer Prices, hit 3.4% in August – a level not seen in 13 years. And it is likely to continue rising until the end of the year.
These developments understandably have people worried. Higher inflation reduces purchasing power and lowers inflation-adjusted wages and interest income. Very low nominal interest rates compound these worries as commercial banks are increasingly passing negative interest rates on to their customers.
It is important to offer a factual explanation for the recent price increases and an assessment of future risks, especially in Germany where fearmongering is on the rise. Allusions are being made to...
The annual growth rate of the broad monetary aggregate M3 decreased to 7.6% in July 2021 from 8.3% in June, averaging 8.1% in the three months up to July. The components of M3 showed the following developments. The annual growth rate of the narrower aggregate M1, which comprises currency in circulation and overnight deposits, decreased to 11.0% in July from 11.8% in June. The annual growth rate of short-term deposits other than overnight deposits (M2-M1) was -1.8% in July, compared with -1.4% in June. The annual growth rate of marketable instruments (M3-M2) decreased to 7.7% in July from 8.6% in June.
The annual growth rate of the broad monetary aggregate M3 decreased to 7.6% in July 2021 from 8.3% in June, averaging 8.1% in the three months up to July. The components of M3 showed the following developments. The annual growth rate of the narrower aggregate M1, which comprises currency in circulation and overnight deposits, decreased to 11.0% in July from 11.8% in June. The annual growth rate of short-term deposits other than overnight deposits (M2-M1) was -1.8% in July, compared with -1.4% in June. The annual growth rate of marketable instruments (M3-M2) decreased to 7.7% in July from 8.6% in June.
25 August 2021
Could you give us an update on the outlook for the eurozone economy?
It’s important to differentiate between the first and the second halves of the year. It’s significant that second quarter GDP came in well ahead of our June projections. That reflects an earlier opening up, with many countries opening in the middle of the second quarter and onwards. The strength of the world economy and progress in vaccinations were also important factors.
In terms of the second half of the year, it’s still early days. But there’s probably some counterbalance to that good second quarter. The counterbalance is that it looks like bottlenecks are going to be more persistent than expected. There is also some moderation in the world economy, which is natural. And the Delta variant, although it has a more limited impact than earlier waves, remains a headwind.
If you put all of that together -- the fact that the second quarter came in above what we...
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