Long-run saving Peter Praet and monetary policy Member of the - PowerPoint PPT Presentation

Long-run saving Peter Praet and monetary policy Member of the Executive Board of the ECB Parliamentary evening on "Challenges for long-term savings products in the context of the zero- interest policy" Brussels, 14 November 2016

Nominal interest rates and long-term growth expectations 6-10 years ahead grow th 10-year government bond yields expectations for the euro area Annual yields (%) % per annum 20 DE 2.2 EA UK US 2.0 15 1.8 10 1.6 5 1.4 1.2 0 1980 1985 1990 1995 2000 2005 2010 2015 2004 2006 2008 2010 2012 2014 2016 Source: ECB and Haver Source: Consensus Economics Latest observation: October 2016 Latest observation: October 2016

Recoveries and the evolution of potential GDP Real GDP and pre-crisis expected Potential EA output reduction due path to the crisis Index: 2007 = 100 Index, potential GDP in 1999 = 100 Actual growth Counterfactual Potential GDP ES Expected growth path in 2007 Potential GDP 140 120 Actual GDP EA 135 DE 130 110 125 DE 120 115 EA 100 110 ES 105 100 2008 2010 2012 2014 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Source: European Commission, Consensus Economics, ECB calculations Source: European Commission Fall 2016 forecast, Output Gap Working Group. Latest observation: 2015 Note: Counterfactual potential GDP assumes that potential GDP continued to grow at its 2007 growth rate Note: Dotted lines represent evolution of GDP basedon private sector expectations in October 2007.

Inflation and deflation protection Price of inflation and deflation protection Basis points per annum Deflation protection 350 Inflation protection 300 250 200 150 100 50 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Bloomberg Latest observation: 10 November 2016

Euro area inflation and economic activity Euro area real GDP, composite PMI Euro area HICP inflation and ESI annual percentage changes q-o-q growth rate, diffusion index and percentage balance 60 2 All-items excluding energy and food 4.0 Overall index 3.5 55 1 3.0 2.5 50 0 2.0 1.5 45 -1 1.0 0.5 40 -2 0.0 real GDP (rhs) ESI (lhs) -0.5 composite PMI output (lhs) 35 -3 2008 2010 2012 2014 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Eurostat and ECB staff calculations Sources: Eurostat, Markit and European Commission. Latest observation: October 2016 Latest observations: 2016Q3 for GDP; October 2016 for ESI and PMI