The Governing Council of the European Central Bank (ECB) today launched a review of its monetary policy strategy. The monetary policy strategy was adopted in 1998 and some of its elements were clarified in 2003.
Since 2003 the euro area and the world economy have been undergoing profound structural changes. Declining trend growth, on the back of slowing productivity and an ageing population, as well as the legacy of the financial crisis, have driven interest rates down, reducing the scope for the ECB and other central banks to ease monetary policy by conventional instruments in the face of adverse cyclical developments. In addition, addressing low inflation is different from the historical challenge of addressing high inflation. The threat to environmental sustainability, rapid digitalisation, globalisation and evolving financial structures have further transformed the environment in which monetary policy operates, including the dynamics of inflation.
In the light of these challenges, the Governing Council has decided to launch a review of its monetary policy strategy, in full respect of the ECB’s price stability mandate as enshrined in the Treaty.
“As our economies are undergoing profound changes, it is the time for a strategy review to ensure we deliver on our mandate in the best interest of Europeans,” said ECB President Christine Lagarde.
The Governing Council will take stock of how the monetary policy strategy has supported the fulfilment of the ECB’s mandate under the Treaty over the years and consider whether any elements of the strategy need to be adjusted. The quantitative formulation of price stability, together with the approaches and instruments by which price stability is achieved, will figure prominently in this exercise. The review will also take into account how other considerations, such as financial stability, employment and environmental sustainability, can be relevant in pursuing the ECB’s mandate. The Governing Council will review the effectiveness and the potential side effects of the monetary policy toolkit developed over the past decade. It will examine how the economic and monetary analyses through which the ECB assesses the risks to price stability should be updated, also in view of ongoing and new trends. Finally, it will review its communication practices.
The process is expected to be concluded by the end of the year. The Governing Council will be guided by two principles: thorough analysis and open minds. Accordingly, the Eurosystem will engage with all stakeholders.
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The Presidents of the three main EU institutions will meet on Thursday in Bazoches to debate the future of the EU as well as current geopolitical challenges.

European Parliament President David Sassoli, European Council President Charles Michel and European Commission President Ursula von der Leyen will meet in Bazoches-sur-Guyonne (France) at the Jean Monnet House, a symbolic place for the history of European integration.
They will discuss the future of the EU, including the upcoming Conference on the Future of Europe, current geopolitical challenges as well as the climate and digital transitions.
President Sassoli said: “We stand at a new departure for Europe. The internal and external challenges facing us remind us all that the European Union is more than a market or economic power, but stands for values that we all share and defend. Our reflections should not forget how much stronger we can be when we act together.”
The three Presidents will wind up the discussions with a joint statement, to be delivered in the European Parliament in Brussels on the morning of Friday 31 January at 11:00. More details will follow.
Compliments of the European Commission

Ahead of 1 February 2020, the day on which the UK will leave the EU in accordance with the Withdrawal Agreement  concluded between the EU and the UK (read the latest news here), the EUIPO has updated the Brexit section on its website.
The Withdrawal Agreement stipulates that during a transition period that will last until 31 December 2020, EU law remains applicable to and in the UK. This extends to the EUTM and RCD Regulations and their implementing instruments.
This continued application of the EUTM Regulations and the RCD Regulations during the transition period includes, in particular, all substantive and procedural provisions as well as the rules concerning representation in proceedings before the EUIPO.
In consequence, all proceedings before the Office that involve grounds of refusal pertaining to the territory of the UK, earlier rights originating from the UK, or parties/representatives domiciled in the UK will run as they did previously, until the end of the transition period.  
For more information, please consult the relevant section on our website.
Compliments of the European Commission

The Constitutional Affairs Committee agreed on Thursday to recommend that the EP plenary should approve the UK withdrawal terms.

After parliamentary ratification in the UK was concluded earlier today, with Royal Assent granted for the European Union (Withdrawal Agreement) Bill, Constitutional Affairs Committee MEPs voted in favour of a positive recommendation regarding the EU-UK Withdrawal Agreement, with 23 votes for, three against and no abstentions.
The vote took place after a statement by Committee Chair Antonio Tajani (EPP, IT) and a discussion between the Parliament’s Brexit coordinator Guy Verhofstadt (Renew Europe, BE) and political group coordinators.
The debate in the Committee focussed on Parliament’s contribution to protecting citizens’ rights in the context of Brexit (with the majority of speakers during the first round commending the EU’s negotiating team), as well as the steps that should be taken by the UK and EU27 governments to continue protecting these rights during the transition period and beyond. The discussion also addressed the overall impact of Brexit and the future relationship between the EU and the UK, which is going to be the objective of the future negotiations.
You can watch the debate on EP Live. Click on the links below for specific parts of the meeting.
Opening statement by Chair Antonio Tajani
Statement by the rapporteur Guy Verhofstadt
Statements by the shadow rapporteurs
Interventions by MEPs on behalf of political groups
Recording of the vote
Statements by MEPs after the vote: part one and part two
Next steps
The UK’s withdrawal from the EU is set for midnight CET on 31 January 2020, with Parliament scheduled to vote on the Agreement next Wednesday, 29 January. To enter into force, any withdrawal agreement between the EU and the UK needs to be approved by the European Parliament by a simple majority of votes cast (Article 50 (2) of the Treaty on European Union). The Council will then conclude the process on the EU side by a qualified majority vote, foreseen for 30 January.
Compliments of the European Parliament

Christine Lagarde, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 23 January 2020
Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting of the Governing Council.
Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. We expect them to remain at their present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within our projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
We will continue to make net purchases under our asset purchase programme (APP) at a monthly pace of €20 billion. We expect them to run for as long as necessary to reinforce the accommodative impact of our policy rates, and to end shortly before we start raising the key ECB interest rates.
We also intend 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 we start 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.
Today the Governing Council also decided to launch a review of the ECB’s monetary policy strategy. Further details about the scope and timetable of the review will be published in a press release today at 15:30 CET.
The incoming data since our last meeting are in line with our baseline scenario of ongoing, but moderate, growth of the euro area economy. In particular, the weakness in the manufacturing sector remains a drag on euro area growth momentum. However, ongoing, albeit decelerating, employment growth and increasing wages continue to support the resilience of the euro area economy. While inflation developments remain subdued overall, there are some signs of a moderate increase in underlying inflation in line with expectations.
The unfolding monetary policy measures are underpinning favourable financing conditions for all sectors of the economy. In particular, easier borrowing conditions for firms and households are supporting consumer spending and business investment. This will sustain the euro area expansion, the build-up of domestic price pressures and, thus, the robust convergence of inflation to our medium-term aim.
At the same time, in the light of the continued subdued inflation outlook, monetary policy has to remain highly accommodative for a prolonged period of time to support underlying inflation pressures and headline inflation developments over the medium term. We will, therefore, closely monitor inflation developments and the impact of the unfolding monetary policy measures on the economy. Our forward guidance will ensure that financial conditions adjust in accordance with changes to the inflation outlook. In any case, the Governing Council continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry.
Let me now explain our assessment in greater detail, starting with the economic analysis. Euro area real GDP increased by 0.3%, quarter on quarter, in the third quarter of 2019, following growth of 0.2% in the second quarter. This pattern of moderate growth reflects the ongoing weakness of international trade in an environment of continued global uncertainties, which has particularly affected the euro area manufacturing sector and has also dampened investment growth. At the same time, the services and construction sectors remain more resilient, despite some moderation in the latter half of 2019. Incoming economic data and survey information point to some stabilisation in euro area growth dynamics, with near-term growth expected to be similar to rates observed in previous quarters. Looking ahead, the euro area expansion will continue to be supported by favourable financing conditions, further employment gains in conjunction with rising wages, the mildly expansionary euro area fiscal stance and the ongoing – albeit somewhat slower – growth in global activity.
The risks surrounding the euro area growth outlook, related to geopolitical factors, rising protectionism and vulnerabilities in emerging markets, remain tilted to the downside, but have become less pronounced as some of the uncertainty surrounding international trade is receding.
Euro area annual HICP inflation increased to 1.3% in December 2019, from 1.0% in November, reflecting mainly higher energy price inflation. On the basis of current futures prices for oil, headline inflation is likely to hover around current levels in the coming months. While indicators of inflation expectations remain at low levels, recently they have either stabilised or ticked up slightly. Measures of underlying inflation have remained generally muted, although there are further indications of a moderate increase in line with previous expectations. While labour cost pressures have strengthened amid tighter labour markets, the weaker growth momentum is delaying their pass-through to inflation. Over the medium term, inflation is expected to increase, supported by our monetary policy measures, the ongoing economic expansion and solid wage growth.
Turning to the monetary analysis, broad money (M3) growth stood at 5.6% in November 2019, broadly unchanged since August. Sustained rates of broad money growth reflect ongoing bank credit creation for the private sector and low opportunity costs of holding M3 relative to other financial instruments. The narrow monetary aggregate M1 continues to be the main contributor to broad money growth on the components side.
The growth of loans to firms and households remained solid, benefiting from the ongoing support provided by our accommodative monetary policy stance, which is reflected in very low bank lending rates. While the annual growth rate of loans to households remained unchanged from October, at 3.5% in November, the annual growth rate of loans to non-financial corporations moderated to 3.4% in November, from 3.8% in October, likely reflecting some lagged reaction to the past weakening in the economy. These developments are also visible in the results of the euro area bank lending survey for the fourth quarter of 2019, which indicate weakening demand for loans to firms, while demand for loans to households for house purchase continued to increase. However, credit standards for both loans to firms and loans to households for house purchase remained broadly unchanged, pointing to still favourable credit supply conditions. Overall, our accommodative monetary policy stance will help to safeguard very favourable bank lending conditions and will continue to support access to financing across all economic sectors and in particular for small and medium-sized enterprises.
To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed that an ample degree of monetary accommodation is still necessary for the continued robust convergence of inflation to levels that are below, but close to, 2% over the medium term.
In order to reap the full benefits from our monetary policy measures, other policy areas must contribute more decisively to raising the longer-term growth potential, supporting aggregate demand at the current juncture and reducing vulnerabilities. The implementation of structural policies in euro area countries needs to be substantially stepped up to boost euro area productivity and growth potential, reduce structural unemployment and increase resilience. The 2019 country-specific recommendations should serve as the relevant signpost.
Regarding fiscal policies, the euro area fiscal stance is expected to continue to provide some support to economic activity. In view of the weak economic outlook, the Governing Council welcomes the Eurogroup’s call in December for differentiated fiscal responses and its readiness to coordinate. Governments with fiscal space should be ready to act in an effective and timely manner. In countries where public debt is high, governments need to pursue prudent policies and meet structural balance targets, which will create the conditions for automatic stabilisers to operate freely. All countries should intensify their efforts to achieve a more growth-friendly composition of public finances.
Likewise, the transparent and consistent implementation of the European Union’s fiscal and economic governance framework over time and across countries remains essential to bolster the resilience of the euro area economy. Improving the functioning of Economic and Monetary Union remains a priority. The Governing Council welcomes the ongoing work and urges further specific and decisive steps to complete the banking union and the capital markets union.
We are now ready to take your questions.
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