Monetary policy plays an important role by creating an environment which facilitates the necessary structural adjustments, even if in itself it cannot address structural aspects of the economy. Indeed, by laying the groundwork for a return of inflation to our objective, our monetary policy measures have been supporting economic activity and have alleviated damage to the economy’s growth potential.
Our asset purchase programme (APP) has been the pivotal component of our strategy for countering and reversing the crisis. As you know, since the programme’s inception in 2015, the Governing Council of the ECB has made net asset purchases under the APP conditional on progress towards a sustained adjustment in the path of inflation to levels below, but close to, 2% over the medium term. We have set forth criteria to measure the headway we have made towards meeting this stated objective since the programme was launched. Next week, the Governing Council will have to assess whether progress so far has been sufficient to warrant a gradual unwinding of our net purchases. In making its assessment, it will consider the underlying strength of the euro area economy and the pass-through to wage and price formations.