Suomen Pankki

How can we avoid a negative equilibrium of low growth and low inflation?

Share

At its meeting on 12 September 2019, the Governing Council of the ECB concluded that economic growth in the euro area will continue to be subdued. The expansion of global trade has stalled, while the headwinds in manufacturing, in particular, have proven more long-lasting than previously forecast. Inflation has persistently fallen short of the ECB's price stability objective. The Governing Council noted that the growth outlook remains beset by prominent downside risks and that inflationary pressures are projected to stay muted.

In response, the Governing Council took the decision at its September meeting to substantially increase its monetary accommodation, lowering the interest rate on the ECB deposit facility by 10 basis points, to -0.50%, and strengthening its forward guidance to indicate that it now expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge towards the price stability objective, and such convergence has been consistently reflected in underlying inflation dynamics. In addition, the Governing Council announced that net purchases under the asset purchase programme will be relaunched at a monthly pace of EUR 20 billion as from 1 November. It also took the decision to ease the modalities of the longer-term refinancing operations as well as introduce a two-tier system for reserve remuneration on banks’ holdings of excess liquidity.

With this package of monetary policy stimulus measures, financial conditions in the euro area will remain very favourable for an extended period, contributing to the euro area's growth outlook also in the long term. ‘We should take care to avoid the sort of harmful equilibrium that arises from prolonged low inflation and zero interest rates, as this would significantly constrain the capacity for monetary policy to balance the economic cycle. This would bring about a lengthy shortfall in economic growth with respect to its potential and hinder efforts to boost employment’, stated Bank of Finland Governor Olli Rehn at the press briefing for the publication of the new issue of the journal Euro & talous.

The discussions concerning a review of the ECB's monetary policy strategy have progressed over the year, and a broad consensus has emerged over its necessity. ‘Successful implementation of the strategy review will deepen the research-based knowledge underpinning the monetary policy strategy and thus help strengthen the common understanding on policy within the Governing Council. The review process should thus contribute to better monetary policy decision-making and support consistent communication,’ emphasised Governor Rehn.

For queries pertaining to monetary policy, contact Governor Olli Rehn, tel. +358 9 183 2001. For further information on the journal Euro & talous, please contact Hanna Freystätter, Head of Division, tel. +358 9 183 2490.

Keywords

Images

Links

About Suomen Pankki

Suomen Pankki
Suomen Pankki
Snellmaninaukio, PL 160
00101 HELSINKI

09 1831http://www.bof.fi

The Bank of Finland is the national monetary authority and central bank of Finland. At the same time, it is also a part of the Eurosystem, which is responsible for monetary policy and other central bank tasks in the euro area and administers use of the world’s second largest currency – the euro.

Subscribe to releases from Suomen Pankki

Subscribe to all the latest releases from Suomen Pankki by registering your e-mail address below. You can unsubscribe at any time.

Latest releases from Suomen Pankki

Housing loan drawdowns lower and holiday cottage loan drawdowns higher than normal in May30.6.2020 13:00:00 EESTPress release

Drawdowns of new housing loans amounted to EUR 1.5 bn in May 2020, a decline of 22% on May 2019. Housing loan drawdowns in May have last been below this amount in 2015. The annualised agreed rate was 0.75%, unchanged on April 2020. Despite the low level of housing loan drawdowns in April and May 2020, annual growth in the housing loan stock (2.8%) has not moderated. This is partly due to the extensive use of interest-only periods for housing loans. After a record surge in April, however, the volume of renegotiated housing loan agreements [1] fell back to almost normal levels in May. In May 2020, the average repayment period of new housing loans surpassed 21 years for the first time and was 21 years 4 months. Over 70% of new housing loans in May were with a maturity of over 20 years. Loans with longer maturities (over 29 years) accounted for 9% of new housing loans, compared with 5% a year earlier in May. May 2020 proved exceptionally busy for drawdowns of loans for holiday residences (

Mindre efterfrågan på bostadslån och större efterfrågan på stuglån i maj än normalt30.6.2020 13:00:00 EESTTiedote

I maj 2020 utbetalades nya bostadslån för 1,5 miljarder euro, vilket är 22 % mindre än vid motsvarande tid för ett år sedan. Utbetalningarna av bostadslån har senast varit mindre i maj år 2015. I maj 2020 var den överenskomna årliga räntan på nya bostadslån (0,75 %) densamma som i april 2020. Trots den svaga efterfrågan i april och maj 2020 har årsökningen i det utestående beloppet av bostadslån (2,8 %) inte mattats av. Det omfattande intresset för att utnyttja möjligheten till amorteringsfrihet har bidragit till att upprätthålla tillväxttakten. Antalet omförhandlade [1] avtal om bostadslån återställdes emellertid efter en rekordlivlig aprilmånad till nära normal nivå i maj. I maj 2020 översteg den genomsnittliga återbetalningstiden för nya bostadslån första gången 21 år och var 21 år 4 månader. I maj hade över 70 % av de nya bostadslånen en återbetalningstid som var längre än 20 år. Av de nya bostadslånen var andelen lån med en längre återbetalningstid (över 29 år) 9 %, när deras ande

Asuntolainanostoja toukokuussa tavanomaista vähemmän ja mökkilainanostoja runsaammin30.6.2020 13:00:00 EESTTiedote

Toukokuussa 2020 uusia asuntolainoja nostettiin 1,5 mrd. euron edestä, mikä on 22 % vähemmän kuin vuosi sitten vastaavana aikana. Toukokuun aikana asuntolainoja nostettiin vähemmän viimeksi vuonna 2015 . Toukokuussa 2020 uusien asuntolainojen sovittu vuosikorko (0,75 %) oli sama kuin huhtikuussa 2020. Huhti- ja toukokuun 2020 vähäisistä nostomääristä huolimatta asuntolainakannan vuosikasvuvauhti (2,8 %) ei ole hidastunut. Kasvuvauhtia on ylläpitänyt osaltaan lyhennysvapaiden laaja käyttö. Uudelleen neuvoteltujen [1] asuntolainasopimusten määrä palasi kuitenkin ennätysvilkkaan huhtikuun jälkeen toukokuussa lähes normaalitasolle. Toukokuussa 2020 uusien asuntolainojen keskimääräinen takaisinmaksuaika ylitti ensimmäistä kertaa 21 vuotta ja oli 21 vuotta 4 kuukautta. Toukokuussa yli 70 % uusista asuntolainoista oli takaisinmaksuajaltaan yli 20 vuotta. Toukokuussa takaisinmaksuajaltaan pidempien lainojen (yli 29 vuotta) osuus uusista asuntolainoista oli 9 %, kun vuosi sitten toukokuussa nii

In our pressroom you can read all our latest releases, find our press contacts, images, documents and other relevant information about us.

Visit our pressroom