This included a new round of macroeconomic projections, which would allow a reassessment of the economic outlook and the balance of risks. The conference is the ECB’s annual flagship event focusing on frontier issues of monetary policy. At the same time, clear risks to GDP growth had emerged for the fourth quarter of 2020, linked primarily to the latest news about the plans for more severe lockdowns from November onwards. Bank lending rates continued to stand near historical lows. These purchases contributed to easing the overall monetary policy stance, thereby helping to offset the downward impact of the pandemic on the projected path of inflation. The rise in COVID-19 cases and the associated intensification of containment measures would restrict activity levels (especially in high-contact sectors), constituting a clear deterioration in the near-term outlook. It was stressed that monetary policy had to aim to preserve favourable financing conditions in the future in order to support economic activity. The Governing Council would reinvest the principal payments from maturing securities purchased under the PEPP until at least the end of 2022. Global financial conditions were broadly unchanged in both advanced and emerging economies. In this context, members emphasised the role of both national and European fiscal policy in cushioning the impact on the economy of necessary containment measures. The results of the euro area bank lending survey signalled a tightening of credit standards in the third quarter of 2020, mainly on account of the deterioration in banks’ perceptions of the risks to the macroeconomic environment and borrowers’ creditworthiness. To do this, we use the anonymous data provided by cookies. Finally, there was broad agreement among members to emphasise that an ambitious and coordinated fiscal stance remained critical and was the most effective policy in the current situation to deal with the effects of the pandemic and the associated containment measures. Moreover, services inflation was expected to remain low, since the services sector was the most exposed to the ongoing intensification of containment measures. The monetary policy measures taken in response to the pandemic had been effective and efficient in stabilising financial markets and supporting financing conditions for households and businesses. The Committee meets on a regular monthly basis and minutes of its meetings are released on the Wednesday of the second week after the meeting takes place. Nevertheless, it was clear that while some sectors – such as manufacturing and construction – would be less affected in the euro area than had been the case in the more general lockdowns earlier in the year, others – such as entertainment and leisure or tourism – would be heavily affected by the new restrictions. Discover euro banknotes and their security features and find out more about the euro. Mr Lane reviewed the global environment and recent economic and monetary developments in the euro area. Finally, growing excess liquidity was increasingly putting downward pressure on the term money market and commercial paper rates. Furthermore, other near-term risk events were looming, including geopolitical risks. Overall, it was emphasised that there was no clear trade-off between containment measures required to reduce the spread of the virus and the impact on the economy and it was recognised that, ultimately, concerns about the economy would remain until a vaccine or effective treatment became widely available, which could take some time. The pandemic had triggered a major increase in non-financial corporate debt ratios in relation to gross operating surplus, both in gross terms and net of liquid assets. Measures of underlying inflation were also weakening. Therefore, there was broad agreement that the Governing Council should communicate that, on the basis of this updated assessment, it would recalibrate its instruments, as appropriate, to ensure that financing conditions remained favourable to support the economic recovery, counteracting the negative impact of the pandemic on the projected inflation path and thereby fostering the convergence of inflation towards the Governing Council’s aim in a sustained manner, in line with its commitment to symmetry. Mr Dombrovskis, Commission Executive Vice-President**, Ms Senkovic, Secretary, Director General Secretariat, Mr Smets, Secretary for monetary policy, Director General Economics, Mr Winkler, Deputy Secretary for monetary policy, Senior Adviser, DG Economics, Mr Bracke, Deputy Director General Communications, Ms Rahmouni-Rousseau, Director General Market Operations, Mr Rostagno, Director General Monetary Policy, Mr Sousa, Deputy Director General Economics. Turning to the euro area, output had rebounded strongly in the third quarter of 2020. Developments in the global composite output Purchasing Managers’ Index (PMI), excluding the euro area, indicated that the recovery in activity was quite strong up to July but had flat-lined in September. According to the survey, banks’ cost of funds and balance sheet situation had not contributed to the tightening, underscoring the positive impact of monetary policy support on bank funding conditions. The Governing Council intended to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it started raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. It also had to be acknowledged, however, that an accommodative monetary policy stance could create the temptation for governments to enter into commitments that were difficult to undo and thereby increase expenditure beyond what was necessary to deal with the pandemic, exacerbating structural deficits and damaging the long-term sustainability of public finances. Incoming data and survey results signalled that the euro area economic recovery was losing momentum more rapidly than expected. MINUTES OF THE MONETARY POLICY COMMITTEE MEETING HELD ON 9 … While some of the factors weighing on inflation were likely to be transitory in nature, the persistence of weak demand implied more prolonged weakness in non-energy industrial goods inflation. Browse the ECB’s reports, publications and research papers and filter them by date or activity. Look at press releases, speeches and interviews and filter them by date, speaker or activity. With regard to the economic analysis, members generally agreed with the assessment of the current economic situation in the euro area and the risks for activity provided by Mr Lane in his introduction. The outcome of the ECB’s Monetary Policy Framework Review is expected to be heavily influenced by the Fed’s review and the COVID-19 pandemic. Navigation Path: Home›Research & Publications›Conferences & seminars›ECB Conference on Monetary Policy: bridging science and practice, Monday, 19 and Tuesday, 20 October 2020Online event. they want to borrow more from the ECB for ‘standard’ monetary policy operations. Look at press releases, speeches and interviews and filter them by date, speaker or activity. This document was provided by Policy Department A at the request of the Committee on Economic and Monetary Affairs. Activity in the services sector was being hit the hardest, since it was most affected by the renewed restrictions on mobility and social interaction. However, the view was expressed that the probability that inflation rates would be closer to the severe scenario included in the September staff projections was increasing, even if no additional negative surprises were to materialise. Although fiscal policy measures were supporting households and firms, consumers were cautious in the light of the pandemic and its ramifications for employment and earnings. It was also remarked that the rate of infections appeared to be more relevant for economic activity than the stringency of containment measures, which varied considerably. 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Furthermore, members widely agreed that, given the sharper slowdown in growth momentum and the weakening of underlying inflation dynamics compared with what had previously been expected, as well as the deterioration in the balance of risks, it would be warranted to recalibrate the monetary policy instruments in December. Accordingly, the amplification of adverse real-financial feedback loops remained a material risk and needed to be closely monitored. Looking at survey-based longer-term inflation expectations, as reported in the latest ECB Survey of Professional Forecasters (SPF), inflation expectations five years ahead had remained broadly stable at around 1.6%-1.7%. PE 648.814 - May 2020 EN STUDY Requested by the ECON committee Monetary Dialogue, June 2020 The European Central Bank’s (ECB) monetary policy meeting today will be the main focus of euro traders as … Retail sales had also softened in the summer months, and manufacturing and services PMIs for September and October suggested that the pace of recovery across the euro area had slowed. Industrial output had bounced back vigorously until August, when growth had decelerated to only 0.7% month on month. The ECB's monetary policy The implementation of the European Central Bank's monetary policy rests on two pillars. Nine months emerged as a compromise, in line with suggestions by the ECB’s Monetary Policy Committee, they added. The press conference starts at 14:30 CET. At the same time, it was underlined that more than half of the PEPP envelope was still available to conduct ongoing purchases in a flexible manner in case of renewed market turbulence. Oil prices had increased slightly, by 1.8%, since the Governing Council’s September monetary policy meeting, to stand at USD 39.8 per barrel on 26 October 2020, after trading in a narrow range. Taking into account the foregoing discussion among the members, upon a proposal by the President, who ascertained that the decisions and proposed communication were supported by all members, the Governing Council took the following monetary policy decisions: The members of the Governing Council subsequently finalised the introductory statement, which the President and the Vice-President would, as usual, deliver at the press conference following the end of the current Governing Council meeting. The conference is the ECB’s annual flagship event focusing on frontier issues of monetary policy. With regard to price developments, there was broad agreement with the assessment presented by Mr Lane in his introduction. The pace of monthly loan flows to firms had recently moderated and the results from the bank lending survey pointed to deteriorating credit conditions. Policy support remained decisive for favourable credit conditions. At its meeting ending on 18 December 2019, the MPC voted by a majority of 7-2 to maintain Bank Rate at 0.75%. Regarding fiscal policies, the fiscal stance was expansionary in 2020 and the latest fiscal plans for 2021 foresaw larger support than previously expected. It was remarked that the flexibility embedded in the PEPP was essential to its continued success. In bond markets, heightened expectations of fiscal stimulus in the United States had led to a notable steepening of the US Treasury curve, also reflecting rising inflation expectations. Market participants had pointed to three main reasons to explain why the spreads had fallen further. It was observed that headline inflation was now expected to be in negative territory for longer than had been foreseen in the September ECB staff projections. Accordingly, measures of underlying inflation were likely to remain subdued in the context of weak demand and significant slack in labour and product markets. Rising COVID-19 infection rates were seen as undermining confidence again and leading to additional containment measures, generating a loss in growth momentum in the fourth quarter earlier and at a faster pace than had been foreseen. The European Central Bank (ECB) is the central institution of the Economic and Monetary Union and has been responsible for conducting monetary policy for the euro area since 1 … At present, euro area firms’ cash coverage was nearly four times higher than at the height of the global financial crisis. It was noted that the restrictions being implemented now tended to be more targeted than in the spring, either at regions or at sectors, and could therefore have a more limited effect on activity than earlier in the year. As in March, the economic situation was once again changing rapidly. The curve was now measurably below the pre-pandemic level and firmly in negative territory up to the ten-year maturity. Moreover, further fiscal and supervisory policy support might be forthcoming in the fourth quarter. This was also clearly visible in corporate bond markets. The relatively muted reaction of markets to the second wave of the pandemic was seen as evidence of the effectiveness of the ECB’s monetary policy measures in containing tail risks, including the risk of market fragmentation. This allowed the Governing Council to effectively stave off risks to the smooth transmission of monetary policy. 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