2018-07-11 the ecbs monetary policy - standard and non ......jul 11, 2018 · 2003 2005 2007 2009...

The ECB’s monetary policy: Standard and non-standard measures

ECB Central Banking SeminarFrankfurt, 11 July 2018

Katrin AssenmacherDirectorate General Monetary PolicyMonetary Policy Strategy Division

ECB-Public

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www.ecb.europa.eu ©

1

2 The situation in 2014

Overview

3 The ECB’s monetary policy measures since June 2014

4 The June 2018 decision

The ECB’s mandate and strategy

2

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Article 127 of the Treaty on the Functioning of the European Union :

The primary objective of the ESCB [Eurosystem] shall be to maintain price stability.

Without prejudice to the objective ofprice stability, the ESCB shall supportthe general economic policies in theUnion with a view to contributing to theachievement of the objectives of theUnion as laid down in Article 3 of theTreaty on European Union.“

3

The ECB‘s Mandate: Price Stability

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The ECB’s monetary policy strategy

4

The ECB’s monetary policy strategy – key features

The quantitative definition of price stability

Medium-termorientation

• Economic analysis• Monetary analysis

The two-pillar approach

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Year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2% over the medium term.

Clarification of the Strategy (2003)The Governing Council will aim to maintain inflation rates below, but close to, 2% over the medium term (NB: symmetry = both upside and downside deviations)

Why 2%?– Possible upward bias in consumer price index (HICP).– Allows for cross-country inflation differentials to occur at positive euro area

inflation rates.– Zero inflation restricts central bank’s room for maneuver in case of negative

shocks (Zero Lower Bound problem).

Quantitative Definition of Price Stability (1998)

The ECB’s mandate and monetary policy strategy – price stability

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Why price stability over the medium-term?

6

The ECB’s mandate and monetary policy strategy – medium-term orientation

Transmission of monetary policy impulse and economic shocks to prices subject to “long and variable lags”

(e.g.: M. Friedman, 1961)

Excessive activism raises volatility of output and inflation and may render monetary policy pro-cyclical(e.g.: A. Orphanides and J.C. Williams, 2004)

Medium-term orientation of monetary policy is more conducive to macroeconomic stability

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www.ecb.europa.eu © 7

The ECB’s mandate and monetary policy strategy – two pillar strategy

Economicanalysis

Monetary analysis

Analysis of economic dynamics and shocks Analysis of monetary trends

Full set of information

Governing Council takes monetary policy decisions based on a comprehensive

assessment of the risks to price stability

Governing Council takes monetary policy decisions based on a comprehensive

assessment of the risks to price stability

Cross-checking

“To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed that today’s monetary policy decisions will ensure the ample degree of monetary accommodation necessary for the continued sustained convergence of inflation towards levels that are below, but close to, 2% over the medium term.” (Introductory Statement, 14 June 2018)

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ECB key interest rates(percentages per annum, January 2003 – August 2007)

Source: ECB.Notes: Monthly data. “MLF” stands for marginal lending facility, “MRO” stands for main refinancing operations and “DFR” is the rate on thedeposit facility.

Pre-crisis: implementation of monetary policy via key interest rates…

0

1

2

3

4

5

6

0

1

2

3

4

5

6

2003 2004 2005 2006 2007

MRO rate DFR MLF rate

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Eurosystem balance sheet – selected items(EUR billions, January 2003 – August 2007)

Source: ECB.Notes: Monthly data. The structural liquidity needs of the banking sector equals the sum of autonomous factors and reserve requirements. “LTROs” standsfor longer-term refinancing operations.

9

…and limited liquidity provision via reverse repos

0

100

200

300

400

500

600

0

100

200

300

400

500

600

2003 2004 2005 2006 2007

Main refinancing operations LTROs Structural liquidity needs

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ECB key interest rates and EONIA(percentages per annum, January 2003 – August 2007)

Source: ECB.Notes: Monthly data. “MLF” stands for marginal lending facility, “MRO” stands for main refinancing operations, “DFR” is the rate on the deposit facilityand “EONIA” is the euro overnight unsecured interbank rate.

Smooth transmission to money market rates…

0

1

2

3

4

5

6

0

1

2

3

4

5

6

2003 2004 2005 2006 2007

MRO rate DFR MLF rate EONIA

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ECB key interest rates, EONIA and bank lending rates on loans to NFCs(percentages per annum, January 2003 – August 2007)

Source: ECB.Notes: Monthly data. “MLF” stands for marginal lending facility, “MRO” stands for main refinancing operations, “DFR” is the rate on the deposit facilityand “EONIA” is the euro overnight unsecured interbank rate. Bank lending rates are calculated by aggregating short- and long-term rates using a 24-month moving average of new business volumes.

…and bank lending rates

0

1

2

3

4

5

6

0

1

2

3

4

5

6

2003 2004 2005 2006 2007

DE ES FR IT EA

MRO rate MLF rate DFR EONIA

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1


Overview


4 The June 2018 decision


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Source: ECB, Thomson Reuters Datastream.Latest observation: June 2018.

Sovereign debt crisis let bond spread soar

10-year government bond yields(percentages per annum)

-2

0

2

4

6

8

10

12

14

16

-2

0

2

4

6

8

10

12

14

16

2007 2009 2011 2013 2015 2017

DE FR ES IT NL IE PT

July 2012: Draghi's speech in London

September 2012: Start of Outright Monetary

Transactions

June 2014: Startof 2014-2018 ECB package

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-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

2003 2005 2007 2009 2011 2013 2015

Measures of underlying inflationHICP inflationDec-2014 staff projectionHICP swap-implied (29 Aug 2014)

14

Actual and projected HICP inflation, and measures of underlying inflation

(year-on-year percentage change)

Source: ECB staff projections and calculations.Notes: The measures of underlying inflation (green range) include HICP inflation excluding food and energy, and HICP excluding food, energy, travel-related items andclothing.Latest observation: 2014Q3 for realised figures, December 2014 MPE for macroeconomic projections, 29 August 2014 for swap-implied HICP.

Sustained disinflation and bleak inflation outlook…

credit easing

measures

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… amid a double-dip recession…

90

100

110

120

130

140

150

90

100

110

120

130

140

150

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

EA US Japan

Sources: Eurostat, BEA, Cabinet Office, ECB calculations.Notes: horizontal dotted lines represent pre-crisis peak real GDP level.Latest observation: 2018 Q1.

Real GDP(index, 1999Q1=100)

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-1.50

-1.25

-1.00

-0.75

-0.50

-0.25

0.00

0.25

0.50

-1.50

-1.25

-1.00

-0.75

-0.50

-0.25

0.00

0.25

0.50

MRO DE FR ES IT

∆ MRO and ∆ Bank lending rates for NFC

… and impaired bank lending transmission…

0

1

2

3

4

5

0

1

2

3

4

5

2011 2012 2013 2014

DE ES FR IT EA MRO

Sources: ECB, ECB calculations.Notes: Lending rates are calculated by aggregating short and long-term rates using a 24-month moving average of new business volumes.Latest observation: May 2014

Bank lending rates for loans to non-financial corporates (NFCs)

(percent per year, 2011-2014)

Change in key policy rate and bank lending rates for loans to NFCs from 07/2011 to 01/2014

(percentage points, 2011-2014)

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Sources: ECB calculations.Notes: Lending rates are calculated by aggregating short and long-term rates using a 24-month moving average of new business volumes.Latest observation: July 2010

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

MRO DE FR ES IT


…compared to normal times

0

2

4

6

8

0

2

4

6

8

2007 2008 2009 2010

DE ES FR IT EA MRO



Change in bank lending rates for loans to NFCs from 07/2008 to 07/2010

(percentage points)

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… with a resulting credit crunch

Source: ECB.Notes: Monthly data. “NFCs” stands for non-financial corporations and “HHs” stands for households.Latest observation: May 2018.

MFI loans to the private sector (annual growth rates)

-4

-2

0

2

4

-4

-2

0

2

4

2010 2011 2012 2013 2014 2015 2016 2017 2018

Loans to NFCs adjusted for sales and securitisationLoans to HHs adjusted for sales and securitisationLoans to private sector adjusted for sales and securitisation

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1


Overview

The ECB’s monetary policy measures since June 20143

The June 2018 decision4


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The ECB´s monetary policy measures in pursuit of its price stability mandate

20

Policy instrument Reductions in main policy rates counteract downside risks to price stability

Non-standard measurescomplement/substitute reductions in main policy rate in the presence of…

…impairments in monetary policy transmission mechanism

…limited room for further loosening via conventional policy instruments

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A three-pronged approach

Credit Easing

Longer-term loans to banks with incentive mechanisms to ensure an effective pass-through to households and firms (e.g. “Targeted Longer-Term Refinancing Operations” - TLTROs)

Forward Guidance

Signaling the future course of monetary policy action (e.g. “[The Governing Council] expect[s] [key ECB interest rates] to remain at their present levels for an extended period of time, and well past the horizon of [the ECB’s] net asset purchases.”)

Asset Purchase Programme

Purchases of private and public securities to lower risk-free interest rates, compress risk premia across financial assets and encourage portfolio rebalancing towards lending to households and firms

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Ass

et P

urch

ase

Prog

ram

(APP

)The ECB’s unconventional measures since June 2014

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ECB key interest rates, EONIA and excess liquidity(lhs: percentages per annum; rhs: EUR billions)

Negative interest rates and excess liquidity

Source: ECB.Notes: Daily data. “MLF” stands for marginal lending facility, “MRO” stands for main refinancing operations, “DFR” is the rate on the deposit facilityand “EONIA” is the euro overnight unsecured interbank rate.Latest observation: 13 June 2018.

0

200

400

600

800

1000

1200

1400

1600

1800

2000

-1

0

1

2

3

4

5

6

2007 2009 2011 2013 2015 2017

MLF (lhs) DF (lhs) MRO (lhs) EONIA (lhs) Excess liquidity (30-day MA)

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APP compresses term premia over the whole range of the yield curve

Synthetic euro area sovereign term structure(percentages per annum)

Changes in key financial indicators and policy contribution since June 2014

(basis points; NEER in percent)

Sources: Bloomberg, ECB, ECB calculations.Notes: The impact of credit easing is estimated on the basis of an event-study methodology which focuses on the announcement effects of the June-September 2014package; see the ECB Economic Bulletin Issue 7 / 2015. The impact of the deposit facility rate (DFR) cut rests on the announcement effects of the September 2014 DFRcut. APP encompasses the effects of the asset purchase measures adopted at the January and December 2015 Governing Council meetings, the March and December2016 meetings and the October 2017 meeting, see Altavilla, C. Carboni, G. and Motto, R. (2015) “Asset purchase programmes and financial markets: lessons from theeuro area”, De Santis, R. (2016), “Impact of the asset purchase programme on euro area government bond yields using market news”. For the underlying term structuremodelling framework see Li, C. and Wei, M. (2013), “Term Structure Modeling with Supply Factors and the Federal Reserve’s Large-Scale Asset Purchase Programs”. Forthe underlying ISIN-by-ISIN regression framework see to D’Amico, S. and King, T. B. (2013), “Flow and stock effects of large-scale treasury purchases: Evidence on theimportance of local supply”. The response of long-term yields to a conventional 100bps monetary policy shock (memo item) is computed by (i) regressing the daily changein sovereign yields on the policy surprise, which is identified as the change in the 2y OIS instrumented with its intra-daily change around Governing Council policy meetingsand (ii) re-scaling the policy shock to 100bps. The sample spans January 2005 to June 2014. Lending rates refer to rates to NFCs. Changes in lending rates are based onmonthly data, the reference period for which is June 2014 to March 2020.Latest observation: 15 June 2018

-20

-15

-10

-5

0

-200

-150

-100

-50

0

EA 10yyield

OIS 10yyield

OIS 1yyield

NFCbondyield

Bankbondyield

Lendingrates

NEER(%,rhs)

Policy measures: credit easing, APP, and DFRChange 15 Jun 2018 - 04 Jun 2014Conventional 100bps policy shock

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

1 2 3 4 5 6 7 8 9 10Maturity (years)

EA gov yield (04 Jun 14)

EA gov yield (15 Jun 18)

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Change in bank lending rates for loans to NFCs from 05/2014 to 02/2018

(percentage points, 2014-2018)

0

1

2

3

4

5

0

1

2

3

4

5

2014 2015 2016 2017 2018

DE ES FR IT EA MRO

Sources: ECB, ECB calculations.Notes: The indicator for the total cost of lending is calculated by aggregating short and long-term rates using a 24-month moving average of new business volumes.Latest observation: February 2018.

-2.50

-2.00

-1.50

-1.00

-0.50

0.00

0.50

-2.50

-2.00

-1.50

-1.00

-0.50

0.00

0.50

MRO DE FR ES IT


NIRP, TLTROs and APP together unclogged bank-based transmission

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Source: ECB.Note: Other counterparts include capital and reserves (inverted).Latest observation: March 2018.

…and restore money and credit growth

M3 (annual percentage changes; percentage point contributions)

-10

-5

0

5

10

15

20

25

-10

-5

0

5

10

15

20

25

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Other counterpartsInflows from redemption of longer-term debt securities issued by MFIsCredit to the private sector by MFIs (including Eurosystem)Credit to general government by MFIs excluding EurosystemEurosystem purchases of government debt securitiesNet external assetsM3

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Real GDP growth: actual, baseline projection and counterfactual without policy contribution

(year on year percentage change)

HICP inflation: actual, baseline projection and counterfactual without policy contribution

(year on year percentage change)

Source: ECB computations, SAPI Task Force, March 2018 MPE, BMEs.Notes: HICP inflation and real GDP growth are based on the June 2018 BMPE; the median and range reflect estimates of HICP inflation and real GDP growth over the projection horizonin the absence of monetary policy support ; these estimates are obtained from three different exercises: BMEs, the SAPI Task Force and the Expert Group.Latest observation: 2018Q1 for real GDP and 2018Q2 (May flash) for HICP.

27

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

max-min range w/o policy HICP inflationmedian w/o policy June 2018 BMPE

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

max-min range w/o policy real GDP growthmedian w/o policy June 2018 BMPE

The macroeconomic impact of NIRP, TLTRO and APP has been material

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1

2 The situation in June 2014

Overview


The June 2018 decision4


28

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[T]he Governing Council today made the following decisions: First, as regards non-standard monetary policy measures, we will continue to

make net purchases under the APP at the current monthly pace of €30 billion until the end of September 2018. We anticipate that, after September 2018, subject to incoming data confirming our medium-term inflation outlook, we will reduce the monthly pace of the net asset purchases to €15 billion until the end of December 2018 and then end net purchases.

Second, we intend to maintain our policy of reinvesting the principal payments from maturing securities purchased under the APP for an extended period of time after the end of our net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

Third, we decided to keep the key ECB interest rates unchanged and we expect them to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with our current expectations of a sustained adjustment path.”

Introductory Statement 14 June 2018

The June 2018 decision

29

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Sustained adjustment in the path of inflation

Asset purchases to continue until there is “sustained adjustment in the path of inflation“

1. Inflation is on a path to levels below, but close to 2% over a meaningful medium-term horizon;

2. Inflation is durable and stabilisesaround those levels with sufficient confidence;

3. Inflation is self-sustained, meaning it will maintain its trajectory even with diminishing support from monetary policy

[The relevant metric in each case is euro area inflation, not the inflation rates of any individual country.]

“[…] net asset purchases, at the current monthly pace of €30 billion, are intended to run until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.”

“We continue to expect [key interest rates] to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases.”

Forward Guidance(Press conference 26 April 2018)

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Source: Eurosystem and ECB staff projections.

1.9%

Sustained Adjustment

Convergence expected within meaningful medium-term horizon

June 2018 BMPE: Actual, projected HICP inflation and projected HICP inflation from

previous (B)MPE vintages(year-on-year percentage change)

31

[T]he Governing Council concluded that progress towards a sustained adjustment in inflation has been substantial so far.

Looking ahead, underlying inflation is expected to pick up towards the end of the year and thereafter to increase gradually over the medium term […]

This assessment is also broadly reflected in the June 2018 Eurosystem staff macroeconomic projections for the euro area, which foresee annual HICP inflation at 1.7% in 2018, 2019 and 2020.


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-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

2013 2014 2015 2016 2017 2018 2019 2020

Measures of underlying inflationHICP inflation (May-2018 flash)HICP excl. energy and food (May-2018 flash)HICP swap-implied (latest)HICP swap-implied (Dec-17, Jan-18, Mar-18 GovC)Jun-2018 BMPEHICP inflation

Sources: Bloomberg, ECB staff projections and calculations.Notes: The green range includes measures of underlying inflation, i.e. HICP inflationexcluding food and energy, HICP inflation excluding food, energy, travel-related itemsand clothing, PCCI (formerly U2 core) and Super-core. Measures of underlying inflationrefer to 2018Q2 (April estimates). The grey lines indicate forward curves of inflationexpectations implied by the HICP inflation-linked swaps observed at various past dates.The orange line is the latest observation of such curves (8 June 2018).

June 2018 BMPE: Actual and projected HICP inflation, measures of underlying inflation and market-based inflation expectations

(year-on-year percentage change)

32

[T]he underlying strength of the euro area economy and the continuing ample degree of monetary accommodation provide grounds to be confident that the sustained convergence of inflation towards our aim will continue in the period ahead.

Looking ahead, underlying inflation is […] supported by our monetary policy measures, the continuing economic expansion, the corresponding absorption of economic slack and rising wage growth.



1.9%

Confidence from increased underlying inflation measures

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Confidence: lower inflation uncertainty in markets


With longer-term inflation expectations well anchored, the underlying strength of the euro area economy and the continuing ample degree of monetary accommodation provide grounds to be confident that the sustained convergence of inflation towards our aim will continue in the period ahead.


Risk neutral density function of euro area inflation over next five years

(density)

Sources: Thomson Reuters and ECB calculations.Note: Implied probability density functions are computed from 5-year maturity zero-coupon inflation option floors. Risk neutral probabilities may differ significantly fromphysical (or "true") probability distributions. Shaded areas indicate the probability massassigned to an inflation rate below 0% (grey area) and 1.5% over the next 5 years.

-1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0

APP announcement (22 Jan 2015)One year ago (1 Jun 2017)Latest observation (7 Jun 2018)

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Resilience: waning influence of past policies

34

Contribution of ECB’s non-standard measures taken since 2014 to HICP inflation

(annual, percentage points)

Source: ECB staff projections and calculations. Notes: The contribution of policy isestimated on the basis of macroeconomic elasticities taken from the SAPI models, theExpert Group models and the Basic Model Elasticities (BMEs).

[T]he continuing ample degree of monetary accommodation provide[s] grounds to be confident that the sustained convergence of inflation towards our aim will continue in the period ahead, and will be maintained even after a gradual winding-down of our net asset purchases.

Today’s monetary policy decisions maintain the current ample degree of monetary accommodation that will ensure the continued sustained convergence of inflation towards levels that are below, but close to, 2% over the medium term. […] This support will continue to be provided by the net asset purchases until the end of the year, by the sizeable stock of acquired assets and the associated reinvestments, and by our enhanced forward guidance on the key ECB interest rates.



0.0

0.2

0.4

0.6

0.8

1.0

0.0

0.2

0.4

0.6

0.8

1.0

2016 2017 2018 2019 2020

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Thank you

35

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Transmission via interest rate channel blocked

Monetary policy interest rates

Credit supply,bank lending rates

Inflationexpectations

Market interest rates,asset prices

Exchange rates

Import pricesSupply and demand in goods and labour marketsWage and price setting

Price developments

Expectation channel Bank lending channel Interest rate channel

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0

500

1,000

1,500

2,000

2,500

3,000

3,500

2007 2009 2011 2013 2015 2017Main refinancing operations LTROs TLTROs Purchases of private sector securities Purchases of public sector securitites

Beginning of the financial turbulence

9 Aug 2007

15 Sep 2008

9M

ar 2015

Intensificationof the

financial turbulence

Start of the public sector purchase

programme (PSPP)

Start of the 2014-2017 ECB

package of measures

5 Jun 2014

ECB monetary policy assets(in billion €)

Balance sheet expansion: TLTROs and Asset Purchase Programme

Source: ECBLatest observation: 10 April 2018.

37

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Loans to households by original maturity or time to interest rate reset

(percent)

Loans to non-financial corporations by original maturity or time to interest rate reset

(percent)

Source: ECBNotes: Breakdown as of December 2017. Based on outstanding amounts of loans.Short-term refers to loans with original maturity up to 1 year and overdrafts plus loanswith a remaining maturity over 1 year and interest rate reset within the next 12 months.

Source: ECB.Notes: Breakdown as of December 2017. Based on outstanding amounts of loans.Short-term refers to loans with original maturity up to 1 year and overdrafts plus loanswith a remaining maturity over 1 year and interest rate reset within the next 12 months.

0%

20%

40%

60%

80%

100%

0%

20%

40%

60%

80%

100%

Less vulnerable countries Vulnerable countries

short-term long-term

0%

20%

40%

60%

80%

100%

0%

20%

40%

60%

80%

100%

Less vulnerable countries Vulnerable countries

short-term long-term

Vulnerable countries rely more on short-term loans

38

Rubric


TLTROs reinforce incentives for banks to lend on borrowed funds

Lending to NFCs by TLTRO-bidders and non-bidders(index=1 in June 2014)

Source: ECB.Notes: Notional stock of loans to non-financial corporations. It is constructed by adding the net flows of loans to NFCs to the stock of NFC loans as of June 2013. Depictedis the aggregate evolution for the group of banks that borrowed from both the TLTRO-I and II and the group of banks which did not access any of the two. Based onsample of euro area MFI for which individual balance sheet information is available. Vulnerable countries are Spain, Italy, Greece, Cyprus, Portugal and Slovenia. Lessvulnerable countries are the remaining euro area countries. The series are not seasonally adjusted. Latest observation is December 2017

0.85

0.90

0.95

1.00

1.05

1.10

Jun.13 Jun.14 Jun.15 Jun.16 Jun.17

non-bidders in TLTRO-I and TLTRO-IIbidders in both TLTRO-I and TLTRO-II

vulnerable countries

0.85

0.90

0.95

1.00

1.05

1.10

Jun.13 Jun.14 Jun.15 Jun.16 Jun.17

less vulnerable countries

Rubric


Cumulated change in ROA across bank business model (basis points)

Recovery in profitability for all categories of banks

Source: ECB calculations. Note: The charts report the changes in return on assets (ROA) by bank business model historically observed in 2014-2017Q4 (red solid line) and projected ROA(red dashed line). Projections are based on a dynamic panel VAR model that uses individual balance sheet data from the iBSI dataset matched with Supervisory and SNL data. Thevariables included in the model are: ROA, lending rates to NFPS, deposit rates, NPLs, real GDP growth, inflation rate and interest rates with a remaining maturity of 2-, 5-, and 10-years.The baseline is constructed as a conditional forecast where the ROA of individual banks are projected for the next 3-year horizon conditional on the interest rates and macroeconomicoutlook consistent with the September 17 MPE .

0

20

40

60

80

2014 2015 2016 2017 2018 2019

G‐SIB

0

20

40

60

80

2014 2015 2016 2017 2018 2019

Retail lender Retail lender

0

20

40

60

80

2014 2015 2016 2017 2018 2019

Specialised Lender

0

20

40

60

80

2014 2015 2016 2017 2018 2019

Universal Bank

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20 quarters of positive real GDP growth

Real GDP growth – survey indicators(lhs: diffusion index; rhs: q-o-q % change)

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

20

25

30

35

40

45

50

55

60

65

2008 2010 2012 2014 2016 2018

Real GDP (rhs) ESI (lhs) Composite PMI (lhs)

Sources: Eurostat, ECB calculations.Note: Other income comprises operating surplus, property income, direct taxes andtransfers. All income components are deflated with the GDP deflator. The contribution fromthe terms of trade is proxied by the differential in the GDP and consumption deflator.Consumption and total disposable income are deflated with the consumption deflator. Latestobservations: 2017Q4.

Unemployment rate, level of employment and total hours worked

(lhs: index, rhs: percentage points)

Sources: Eurostat, ECB calculations.Latest observations: 2017Q4 (employment, hours worked), 2018Q1 (unemployment).

7

8

9

10

11

12

13

92

94

96

98

100

102

2008 2010 2012 2014 2016 2018

Unemployment rate (rhs)EmploymentTotal hours worked

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Expropriating savers?

Changes in net interest income by sector(percent of GDP)

Real term deposit rates in Germany(percent)

-3

-2

-1

0

1

2

3

4

-3

-2

-1

0

1

2

3

4

1974 1979 1984 1989 1994 1999 2004 2009 2014

Real deposit rates of banks / Savings deposits (3 monthsmaturity)Real interest rates of banks / new businesess / households'deposits (3 months maturity)

Source: ECB. Note: The chart reflects the changes from Q2-2008 to Q3-2017, and from Q2-2014 to Q3-2017, in the 4-quarter moving average of net interest income. To exclude the impact of variations in the stocks of assets/liabilities on net interest income, the changes are computed by applying the asset and liability rates of return on the notional asset and liability stocks in Q1-2008 and Q1-2014, respectively. Changes in net interest income are expressed as percentages of GDP, with GDP fixed at the respective starting points.

Source: Deutsche Bundesbank.Latest observation: February 2018.

42

Rubric


APP effects are strongly skewed toward low-income households

Estimated APP impact on unemployment rate by income quintile (percentage points)

Estimated APP impact on mean income by income quintile

(percent)

Sources: Lenza and Slacalek (2018).Note: The numbers in brackets on the RHS chart show levels of mean gross household income 4 quarters after the impact of APP. Euro area aggregates are calculated as the totalfor the four large countries: Germany, Spain, France and Italy.

43

Rubric


Sources: Eurostat, Dealogic, ECB estimates.Notes: MFI loans adjusted for sales, securitisation and cash pooling activities. Loansfrom non-MFIs include loans from OFIs and ICPFs. Latest observation: 2017 Q4 forEAA data. Estimates for 2018 Q1 (the blue diamond) are based on the ECB BSI andSEC data and Dealogic.

External financing of euro area NFCs based on selected instruments (annual flows in EUR bn)

Source: Eurostat, ECB calculations.Notes: Leverage is calculated by dividing total liabilities net of shares and other equitywith total assets. Consolidated gross debt is defined as the sum of total loans granted toNFCs net of intra-sectoral lending, debt securities issued and pension liabilities.Latest observation: 2017Q3 for DE, ES, FR, IT; 2017Q4 for EA.

NFCs’ leverage at market value (LHS) and consolidated gross debt (RHS)

(percent of total assets; percent of gross value added)

30

35

40

45

50

55

60

65

70

2004 2007 2010 2013 2016

DE ES FR IT EA

75

100

125

150

175

200

225

2004 2007 2010 2013 2016-300

-150

0

150

300

450

600

750

900

-300

-150

0

150

300

450

600

750

900

2004 2006 2008 2010 2012 2014 2016 2018

loans from non-MFIs to NFCs (excl. securitisations)net issuance of listed shares by NFCsnet issuance of debt securities by NFCsMFI loans to NFCs (adjusted)total

NFC loan growth consistent with corporate deleveraging

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Rubric


Real household loans around starting period of house price booms

(indices, normalised to 100 at T=trough; T=2013Q4)

Real house prices around starting period of house price booms

(indices, normalised to 100 at T=trough; T=2013Q4)

Sources: BIS, Fed Dallas, OECD and ECB calculations.Notes: Based on data from 1975Q1 to 2017Q3 for euro area countries. Trough (startingpoint of house price normal increases or booms) identified via quarterly version of Bry-Boschan algorithm by Harding and Pagan, 2002. Dotted line refers to median duringhouse price booms. Grey range refers to interquartile range during normal house priceincreases.

Sources: BIS, Fed Dallas, OECD and ECB calculations.Notes: Based on data from 1975Q1 to 2017Q4 for euro area countries. Trough (startingpoint of house price normal increases or booms) identified via quarterly version of Bry-Boschan algorithm by Harding and Pagan, 2002. Dotted line refers to median duringhouse price booms. Grey range refers to interquartile range during normal house priceincreases.

8090

100110120130140150160170180190200210

T-12 T-4 T+4 T+12 T+20 T+28

NORMAL EA BOOMSDE FR ITES NL BE

90

100

110

120

130

140

150

160

T-12 T-4 T+4 T+12 T+20 T+28

NORMAL BOOMS EADE FR ITES NL BE

No signs of real estate bubble

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Rubric


Estimates of over/undervaluation of residential property prices in 2017Q3

(Percentages and distribution of estimates)

Sources: Eurostat, national sources, ECB and ECB calculations.Notes: Estimates based on four different valuation methods: price-to-rent ratio, price-to-income ratio, asset pricing approach and a Bayesian estimated inverted demand model. For further details see Box 3, Financial Stability Review, ECB, June 2011; and box 3, Financial Stability Review, ECB, November 2015. For each country, the blue bars represent the range of estimates across the four valuation methods. Last observation refers to 2017Q3, except for CY (2017Q2).

-30

-20

-10

0

10

20

30

40

50

60

AT FR LU DE PT FI EA NL BE SI ES CY IT GR IE EE LT SK LV MT

House price to income House price to rent Asset pricing approach Inverted demand model

Real estate valuations do not appear overly stretched

46

2018-07-11 the ecbs monetary policy - standard and non ......jul 11, 2018 · 2003 2005 2007 2009...

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