Nonetheless, GDP has so far grown in line with expectations and projections for 2016 have remained virtually unchanged, thanks to the on-going shift towards a more domestic driven recovery; headline inflation was in line with the projections until the autumn, although it decreased significantly in December and January.
The more favourable financing conditions and the depreciation of the euro associated with the ECB’s unconventional measures have largely offset the effects of a less benign external environment on economic activity. But the risk that they may again start to affect long-term inflation expectations must be countered.