These include the burden of high legacy debt, large implicit liabilities related to unfunded pension claims, and intensifying distributional concerns in the context of a widening income gap. We are therefore facing a mixed outlook. The cyclical recovery is proceeding at a moderate pace and, despite continued downside risks, has proven resilient to a range of adverse external shocks.
The ECB’s accommodative monetary policy has been instrumental in sustaining the recovery and the gradual absorption of economic slack. To secure a return of inflation rates to levels below, but close to, 2% over the medium term, it will remain necessary to preserve a very substantial amount of monetary support.