Euro Area monetary policy to remain accommodative

The ECB's quantitative easing programme, which began in March 2015, consisting of €60bn a month of asset purchases (mainly government bonds), has helped to reduce deflation risks, even while further falls in global oil prices have continued to drag headline inflation lower. Without the programme, a stronger euro exchange rate would have amplified the negative impact of moderating global demand, resulting in weaker growth and a higher risk of prolonged negative inflation. 

Instead, euro area growth has been relatively resilient to potential downside risks stemming from the Greek debt crisis and slowdown in emerging markets. Credit conditions have also improved and, barring a further fall in the oil price, current headline inflation is likely to move higher, albeit gradually, over the course of 2016. 

Nevertheless, concerns that an extended period of low inflation may adversely impact on policy credibility led the ECB to increase stimulus further in December 2015. It extended the asset purchase programme to "March 2017 or beyond if necessary" from September 2016 and the deposit rate was reduced by 10bps to a record low of -0.30%.