Global Monetary Policies -- Similarities & Divergences on the Way to the New Normal

Peter Praet Member of the Executive Board of the European Central Bank

Global Monetary Policies – Similarities and divergences on the way to the new normal

GIC/SUERF/Deutsche Bundesbank Conference Frankfurt am Main, 8 February 2018

Rubric Global PMI composite output and global output

Composite output PMIs: euro area, advanced economies and EMEs

(diffusion index, lhs; q-o-q % changes, rhs)

(diffusion index; monthly data) Euro area Advanced economies excl. euro area Emerging market economies

Global GDP (q-o-q percentage change, rhs) Composite output Global composite output - LT average

62

2.0

58

1.5

54

1.0

50

0.5

46

0.0

42

-0.5

60 58 56 54 52 50 48 46 44 42 40

38

38

-1.0

36 34 2007

34 2007

-1.5 2009

2011

2013

2015

2017

2011

2013

2015

2017

Sources: Haver Analytics, Markit, IMF/WEO, ECB calculations.

Notes: Euro area is subtracted from Markit aggregate for advanced economies, based on GDP weights.

Latest observation: January 2018

Sources: Markit, ECB calculations.

Note: Long-term average refers to 1999 onwards.

Latest observation: 2017 Q4 2018-02-08

2009

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Rubric HICP inflation and HICP excluding food and energy

HICP level

(annual percentage changes)

HICP

HICP HICP excl. food and energy Trend line (2%)

HICP excluding food and energy

150

4.5 4.0 3.5

140

3.0 2.5

130

2.0 1.5 1.0

1.3

120

1.0

0.5

110

0.0 -0.5

100 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

-1.0 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Source: ECB. Notes: January 1999=100 Latest observation: January 2018

Sources: Eurostat and ECB calculations.

Latest observation: January 2018 2018-02-08

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Rubric Price of inflation and deflation protection (percentages per annum) Price of inflation protection

Price of deflation protection

400 350 300 250 200 150 100 50 0 2008

2010

2012

2014

2016

2018

Source: Bloomberg Note: The price of inflation (deflation) protection refers to the price of a five-year year-on-year inflation option with a 4% cap (0% floor).

Latest observation: 6 February 2018 2018-02-08

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Rubric

Monetary policy stance determined by combination & interaction of:

• our policy rates, • our asset purchase programme, • and our forward guidance on each of these tools

… complemented by:

• the TLTROs, which will remain outstanding for the next three years 2018-02-08

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Rubric The ECB’s forward guidance Key ECB interest rates • expected to remain at present levels for an extended period of time • and well past horizon of net asset purchases Asset Purchase Programme (APP) • net asset purchases intended to continue at monthly pace of €30 billion, until end-Sep 2018 • or beyond, if necessary & in any case until GovC sees sustained adjustment in path of inflation (SAPI) consistent with inflation aim • if outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards SAPI, stand ready to increase APP in size and/or duration • Eurosystem will reinvest principal payments from maturing securities for an extended period of time after end of net purchases, and in any case for as long as necessary 2018-02-08

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Rubric Criteria for sustained adjustment in the path of inflation (SAPI) Convergence • Headline inflation on course to reach levels below, but close to 2% in the medium term; Confidence • Sufficient confidence in durable stabilisation of inflation around these levels; Resilience • Self-sustaining inflation developments resilient to less supportive monetary policy conditions.

2018-02-08

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