At today’s meeting, the Governing Council of the European Central Bank(ECB) announced that the key ECB interest rates are unchanged with the interest rates on main refinancing operations, marginal lending facility and the deposit facility at 0.00%, 0.25% and -0.40% respectively. The rates are expected to remain at the current level for an extended period of time, well past the horizon of net asset purchases.  Monthly asset purchases will run at the current pace of €30 billion per month until September 2018 or until inflation makes a sustained adjustment that is consistent with inflation target. The ECB noted that monetary stimulus remains necessary for underlying inflation pressure to continue to build up.

Euro area real GDP grew 0.6 per cent in Q4, similar to the previous quarter. The latest data indicate continued strong and broad-based growth momentum. Monetary policy continues to underpin domestic demand. Private consumption is being supported from rising employment and growing household wealth. Business investment is strengthening with favourable financing conditions, rising corporate profits and demand. Global economic growth is supporting euro area exports. The latest projections of the ECB are for real GDP to grow 2.4% in 2018, 1.9% in 2019 and 1.7% in 2020, an upward revision for 2018 and an unchanged outlook for 2019 and 2020.

Euro area inflation was 1.2 per cent in February, down from 1.3 per cent in January. Based on oil price futures, headline inflation is expected to be around 1.5 per cent for remainder of 2018. Underlying inflation remains subdued, but is expected to rise with support from monetary policy measures and the absorption of economic slack. ECB projections for annual inflation are 1.4% in 2018, 1.4% in 2019 and 1.7% in 2020, a downward revision for 2019 and unchanged for 2018 and 2020.

Sources:
European Central Bank