The exposure of the euro area to fluctuations in global financial conditions helps to explain the flexible nature of the ECB’s asset purchase programme, as reflected in the scaling up of monthly purchases from € billion to € billion in March 2016 and the recent decision to return to a monthly volume of € billion from April 2017 onwards.
This flexibility is also embedded in our forward guidance, with the introductory statement to the press conference following last week’s monetary policy meeting of the Governing Council specifying that: “In particular, if the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, we stand ready to increase our asset purchase programme in terms of size and/or duration.” More generally, the high degree of interconnectedness across currency areas makes it imperative that central banks actively cooperate in the sharing of information and analysis, so that monetary policy decisions are based on a shared understanding of current macro-financial conditions.6 Especially in view of Ireland’s status as an international financial centre, the Central Bank of Ireland is committed to playing its part in the analysis of international financial linkages.