The euro area’s central bank leadership reaffirmed confidence in the banking sector, noting robust capital and liquidity buffers. The European Central Bank chief stated that the ECB stands ready to supply liquidity should it be needed to sustain smooth monetary transmission across the euro area. This reassurance came amid ongoing market scrutiny following a day of intense activity in European financial markets, with checks in place to monitor developments and respond promptly if required. The overarching aim remains to protect price stability and financial stability within the euro area, while carefully watching evolving market conditions. (ECB statement, attribution: ECB Governing Council)
The ECB emphasized its readiness to back the euro area banking system with liquidity measures if necessary. The institution underscored that, if existing tools prove insufficient, its staff can anticipate and implement recalibrations to avert liquidity stress and any potential funding gaps. This commitment reflects a proactive stance toward safeguarding financial stability as markets adapt to shifting risk factors. (Source: ECB briefing)
On the eurozone’s macroeconomic outlook, officials described a recent upturn in indicators, driven in part by easing energy pressures and stabilized price dynamics. The continuation of fiscal support and a resilient labor market were cited as key pillars supporting the recovery in the coming quarters. These factors help temper downside risks as the economy adjusts to evolving energy costs and global price trajectories. (ECB assessment)
additional uncertainty
Looking ahead, the ECB’s latest projections place growth near 1.0 percent for 2023, with expectations of 1.6 percent for 2024 and 2025. However, those forecasts were issued before recent tensions in financial markets, prompting acknowledgment of ongoing uncertainty in inflation and growth. Although headline inflation has eased from its peak thanks to lower energy prices, underlying or core inflation remains more persistent, showing continued pressure in the economy with a lag. This dynamic means inflation excluding energy and food continued a gradual rise, with readings around 5.6 percent in February. (ECB projection notes)
The Governing Council reinforced its stance that inflation must return to the 2 percent medium-term target. To that end, last week’s decision raised the ECB’s core interest rates by 50 basis points, reflecting resolve to keep inflation on a clear downward trajectory. Policy rate settings will continue to be guided by assessments of the inflation outlook, the evolving economic and financial data, and the transmission strength of monetary policy. (ECB leadership commentary)