KOF Monetary Policy Communicator, December 2020

The Governing Council decided to adjust the parameters of the asset purchase programmes and the modalities of the longer term refinancing operations.

According to Eurostat’s flash estimate, Euro area annual HICP inflation was -0.3% in November 2020, unchanged from October. Taking into account the end of the temporary reduction in the German VAT rate and upward base effects of lower energy prices, the ECB expects headline inflation to turn positive in early 2021. However, underlying inflation pressures are expected to remain subdued owing to weak demand, notably in the tourism and travel-related sectors, significant slack in labour and product markets and the appreciation of the euro exchange rate. Compared to the economic projections from September, the inflation outlook was revised downward for 2020 and 2022. Eurosystem staff macroe-conomic projections foresee inflation at 0.2% in 2020, 1.0% in 2021, 1.1% in 2022 and 1.4% in 2023 (September projections: 0.3% in 2020, 1.0% in 2021 and 1.3% in 2022).