As the energy crisis fades, governments should roll back the related support measures promptly and in a concerted manner to avoid driving up medium-term inflationary pressures, which would call for a stronger monetary policy response. The ECB welcomes the European Commission's recommendation to Member States to wind down in 2023 the fiscal measures taken in response to the energy price shock.
Domestic demand, especially consumption, remains weak. Business and consumer confidence indicators point to weak activity in the second quarter and remain lower than before Russia's unjustified war against Ukraine and its people. We see a divergence across sectors of the economy. The manufacturing sector is still working through a backlog of orders, but its prospects are worsening.