KOF Monetary Policy Communicator, September 2020

The Governing Council decided to keep the key ECB interest rates, the parameters of the asset purchase programmes and the modalities of the longer term refinancing operations unchanged.

According to Eurostat’s flash estimate, Euro area annual HICP inflation was -0.2% in August 2020, down from 0.4% in July. Low energy prices and weak price pressures resulting from subdued demand and significant labour market slack are dampening headline inflation. Taking into account the temporary reduction in the German VAT rate, the ECB expects headline inflation to remain negative in the coming months before turning positive again in early 2021. Compared to the economic projections from June, the inflation outlook was only revised for 2021. Eurosystem staff macroeconomic projections foresee inflation at 0.3% in 2020, 1.0% in 2021 and 1.3% in 2022 (June projections 0.3% in 2020, 0.8% in 2021 and 1.3% in 2022). The unchanged inflation forecast in 2022 reflects both higher expected underlying inflation and lower energy price inflation.