ECB Chief Economist Peter Praet admitted in a speech that recent developments in the Eurozone “point to some slowdown in the pace of economic growth”. The slowdown reflects “a loss of momentum in global activity”. And, the retreat from strong growth of 2017 was “compounded by short term country-specific of sector-specific factors. Nevertheless, domestic demand “remained resilient” and sentiment indicators remained in “expansionary territory”. He added that the underlying strength of the economy “continues to support our confidence that the sustained convergence of inflation to our aim will proceed.” But “significant monetary policy stimulus is still needed”.
On monetary policy, Praet emphasized that “winding-down of net asset purchases is not tantamount to a withdrawal of monetary policy accommodation.” The “rotation” from net asset purchase towards enhanced forward guidance has “preserved the ample degree of monetary policy accommodation”. And looking ahead, the key policy rates and forward guidance will become an “anchor” for monetary policy as end of asset purchase is nearing. The communications and the rate path will be “calibrated to ensure that inflation remains on a sustained adjustment path.”
Full speech “Preserving monetary accommodation in times of normalisation“.