ECB: The effects of non-conventional monetary policy on real growth

Mar 14 2018

The President of the European Central Bank Mario Draghi gave a speech at the Institute for Monetary and Financial Stability in Frankfurt. The main topic covered are the real effects of extrarodinary monetary policy in the Euro Area, with a focus on the asset purchase programme.

The analysis of last year’s real growth in the Euro Area confirm that the economy expanded wider than expected, together with a growing confidence in the Euro Area itself. Business investment stands 7% over the pre-crisis level, and house investing reaches +17% with respect to the crisis period. Labour market continues on a recovery path, as unemployment reaches the lowest level since 2008.

The contribution of non-conventional monetary policy is retained to be crucial to such developments. The ECB estimates that without the ECB asset purchase programme, the growth rate of bank lending would have been roughly a half of current level, with rates almost 50% higher.

Despite the achievement of these goals, the clear condition to bring net asset purchases to an end is the pattern of inflation: the aim is to inflate the inflation rate up to 2% level, and monetary policy must be conducted such as to continue along this path.

“For this reason,” stated the President “even once the outlook becomes less dependent on net asset purchases, monetary policy still needs to be patient, persistent and prudent to guarantee the return of inflation to our aim.”

Full speech (ECB website)


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