Bangkok, 16 December 2017 Rubric Policymakers need to look beyond - PowerPoint PPT Presentation

ECB-PUBLIC Central banks as Benoît Cœuré risk managers Member of the Executive Board European Central Bank Bangkok, 16 December 2017

Rubric Policymakers need to look beyond central forecasts HICP: forecasts and realised (percent per annum) Sep 13 MPE Jun 14 BMPE Dec 14 BMPE Dec 15 BMPE Mar 17 MPE Jun 17 BMPE Sep 17 BMPE Dec 16 BMPE HICP inflation 3.0 3.0 2.0 2.0 1.0 1.0 0.0 0.0 -1.0 -1.0 2012 2013 2014 2015 2016 2017 2018 2019 Sources: ECB and Eurostat. www.ecb.europa.eu

Rubric Distribution of risks widened throughout 2014 to encompass outright deflation Option implied probability density function of euro area inflation over the next 5 years (% probability) 30-Jun-14 22-Jan-15 06-Dec-17 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Sources: Bloomberg, Reuters, and ECB calculations. Note: Density functions are computed from 5-year maturity zero-coupon inflation option floors under the assumption of risk neutrality. These “risk neutral” density functions may differ significantly from physical (or "true") probability distributions. www.ecb.europa.eu

Rubric Periods of elevated uncertainty may signal risks to economic activity Dow Jones EURO STOXX 50 Volatility Index (index) 70 Sovereign Brexit debt crisis 60 50 40 30 20 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Bloomberg. www.ecb.europa.eu