ECB staff is currently assessing the extent to which the current crisis will affect the likely future inflation and growth trajectories. In the short run, headline inflation can be expected to drop measurably on the back of the decline in energy prices. The March HICP release was a harbinger of what can be expected in coming months.
In the medium run, the effects on inflation, and underlying inflation in particular, will likely depend on two broad factors: first, the depth and persistence of the shock, including possibly protracted hysteresis effects in labour, financial and product markets; and, second, on the effectiveness of the economic policy measures taken in response to the crisis.