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December 12, 2019

At today’s meeting, the Governing Council of the European Central Bank (ECB) announced that policy interest rates are unchanged with the deposit facility, main refinancing operations and the marginal lending facility rates remaining at -0.50%, 0.00% and 0.25%, respectively. Rates are expected to remain at their present levels or lower until ECB’s inflation outlook converges sufficiently close to 2 per cent.

Net purchases were restarted on the first of November under the Asset Purchase Programme (APP) at a monthly pace of €20 billion. Under the APP, private and public sector securities are purchased to address the risks of prolonged periods of low inflation over the medium term. Net purchases are expected to run for as long as necessary to reinforce the impact of policy rates, and to end shortly before the ECB raises key interest rates. Reinvestment of the principal payments from maturing securities will continue alongside future rate increases, to maintain favourable liquidity conditions and continued monetary support.

Euro Area real GDP growthrate was the same in Q3 2019 as it was in Q2 2019 at 0.2 percent. Economic data points to continued moderate growth for 2019. The slowdown in growth reflects weakness in international trade weighing on euro area manufacturing and dampening investment growth. Services and construction activity remains resilient. The economic expansion is supported by favourable financing conditions, employment gains, rising wages, and a mildly expansionary euro area fiscal stance.

Euro area inflation rose from 0.7 per cent in October to 1.0 per cent in November, reflecting mainly higher services and food price inflation. Underlying inflation remained muted, although there are some indications of a mild increase in line with previous expectations  and inflation expectations are at low levels. Labour cost pressures have strengthened amid tighter labour markets, but weaker growth momentum has delayed inflation pass-through.



Sources: European Central Bank