30 April 2015

ECB: Economic Bulletin

European Central Bank (ECB) published Economic Bulletin covering global economic activity indicators, developments in financial markets, euro area HICP inflation and monetary analysis.

Global economic activity indicators continue to suggest a steady growth momentum in early 2015. In particular, activity remains solid in both the United States, despite signs of temporary weakness at the start of the year, and the United Kingdom. At the same time, the recovery remains tepid in Japan. Weakening growth in China has led to the implementation of stimulus measures. Decreasing import volumes in emerging markets constitute renewed signs of a softening in global trade. Low energy prices have lowered global headline inflation rates.

Developments in euro area financial markets in March were influenced above all by the start of the Eurosystem’s purchases of euro-denominated public sector securities on 9 March. Government bond yields declined further across maturities and most countries. The valuation of stocks and other types of asset increased notably.

In the euro area the latest economic indicators and survey results are consistent with continued economic expansion in the first quarter of 2015. Looking beyond the short term, the monetary policy measures taken recently by the Governing Council, the low oil price and the depreciation of the euro should help broaden and gradually strengthen the recovery. At the same time, although labour markets have shown some further signs of improvement, unemployment remains high and economic slack is expected to diminish only gradually.

Annual euro area HICP inflation was -0.1% in March, after a low of -0.6% in January and -0.3% in February. On the basis of current information, inflation is expected to stay very low or negative in the coming months, before starting to increase gradually later in 2015. The gradual increase should be supported by the favourable impact of the ECB’s monetary policy measures on aggregate demand, the impact of the lower euro exchange rate and the assumption embedded in futures markets of somewhat higher oil prices in the years ahead.

Monetary analysis indicates that the annual growth of M3 has recovered further. Moreover, the decline in loans to non-financial corporations has continued to moderate, while the annual rate of growth of loans to households has stabilised at a slightly positive level. The ECB’s monetary policy measures are helping to restore the proper functioning of the monetary policy transmission mechanism and to ease bank lending conditions. Bank funding costs and lending rates have declined further, and the most recent euro area bank lending survey points to further easing of credit standards.

Based on its regular economic and monetary analyses and in line with its forward guidance, the Governing Council decided at its meeting on 15 April 2015 to keep the key ECB interest rates unchanged. Looking ahead, the Governing Council’s focus will be on the full implementation of the monetary policy measures it has taken. These measures will contribute to a further improvement in the economic outlook, a reduction in economic slack and a recovery in money and credit growth. Together, such developments will lead to a sustained return of inflation towards a level below, but close to, 2% over the medium term and will underpin the firm anchoring of medium to long-term inflation expectations.

Economic Bulletin

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