Excerpts from the Account of the monetary policy meeting of the Governing Council of the European Central Bank held in Frankfurt am Main on Wednesday and Thursday, 20-21 April 2016:
Incoming data on the economy pointed to ongoing output growth at a moderate, but steady, pace. However, risks to the growth outlook were still tilted to the downside, while having moderated somewhat. At the same time, HICP inflation remained subdued and was set to persist at low levels for the coming months before gradually picking up, initially due to base effects but later supported by the ECB’s monetary policy measures and the expected economic recovery.
Against this background, there was no need to change the monetary policy stance decided at the last monetary policy meeting, while it was important to focus on the implementation of policy measures. Looking forward, and cross-checking the outcome of the economic analysis with the signals coming from the monetary analysis, it was essential to preserve an appropriate degree of monetary accommodation for as long as needed, reiterating the forward guidance on interest rates and the APP. It was also important to reiterate that the Governing Council would continue to monitor closely the evolution of the outlook for price stability and, if warranted to achieve its objective, act using all the instruments available within its mandate.
Following the discussion of the economic outlook for growth and prices, a broader discussion took place on issues related to the interaction of various policy domains in the euro area, also in view of the low estimates for potential output in the euro area, weak productivity growth, still high unemployment and subdued business investment. Reference was made to various policy initiatives to increase public and private investment and to the role of the central bank in addressing and communicating on structural reforms in particular. Members strongly reiterated the need for other policy areas to contribute much more decisively, both at the national and the European levels, in order to reap the full benefits from the ECB’s monetary policy measures. This echoed recent discussions at the European and global levels referring, inter alia, to the “three-pronged approach” proposed by the IMF in its World Economic Outlook. In particular, members judged that action to raise productivity and improve the business environment, including the provision of an adequate public infrastructure, was vital to increase investment and boost job creation. The swift and effective implementation of structural reforms, in an environment of accommodative monetary policy, not only would lead to higher sustainable economic growth in the euro area, but also would make the euro area more resilient to global shocks.