ROMA (ITALPRESS) – The Governing Council of the ECB is determined to ensure that inflation is established on the target of 2% in the medium term. In order to define the appropriate monetary policy orientation, a data-driven approach will follow, according to which decisions are taken from time to time at each meeting. This is what we read in the Economic Bulletin of the ECB, which points out then how the decisions of the Governing Council on interest rates will be based on the assessment of the prospects for inflation and the associated risks, considered the new economic and financial data, as well as the dynamics of underlying inflation and the intensity of the transmission of monetary policy, without binding on a particular path of rates. The Governing Council is no less prepared to adapt all the instruments it has in its mandate to ensure that inflation is hard to settle on the medium-term objective and to preserve the proper functioning of the monetary policy transmission mechanism.
According to the projections, inflation should be reduced from 2.1% in 2025 to 1.9 in 2026 and then to 1.8 in 2027, then rise to the average 2% target of the Governing Council in 2028. The expected decrease in overall inflation at the beginning of 2026 reflects a downward effect, attributable to the prices of energy goods, while for non-energy components inflation should continue to diminish throughout 2026. The contribution of the energy component to overall inflation should remain contained until the end of 2027, and then increase significantly in 2028 due to the planned implementation of the new EU system for the exchange of emission quotas (ETS2), with an impact on the rise of 0.2 percentage points on overall inflation. The Governing Council stresses the urgent need to strengthen the euro area and its economy. It welcomes the call from the European Commission to governments to give priority to the sustainability of public finances, strategic investments and structural reforms aimed at promoting growth.
Taking full advantage of the potential of the single market is fundamental. It is also of crucial importance to further promote the integration of capital markets, bringing to completion the union of savings and investments and the banking union, according to an ambitious timetable, and to adopt quickly the regulation on the establishment of the digital euro. Despite the attenuation of trade tensions, the international context, still characterized by volatility, could determine interruptions in supply chains, restrain exports and burden on consumption and investments. A deterioration of the climate of trust in the world’s financial markets could lead to more stringent financing conditions, greater risk aversion and a weakening of growth. The geopolitical tensions, in particular the unjustified war of Russia against Ukraine, remain among the main sources of uncertainty. On the other hand, the planned expenditure on defence and infrastructure, together with reforms aimed at supporting productivity, could result in growth to a greater extent than expected. An improvement in the climate of confidence could stimulate private spending.
– photo IPA Agency –
(ITALPRESS).
