The favourable outlook remains vulnerable to the repercussions of possible trade restrictions and to a potentially abrupt increase in risk aversion in the markets. Domestic demand in the euro area is being sustained by rising employment and very accommodative financing conditions. Exports are continuing to improve, driven by the uptick in foreign demand.
According to the Eurosystem’s forecasts, this year output will expand by 2.3 per cent, a similar pace to that recorded in 2017. Inflation remains low, however, reaching 1.3 per cent in January; core inflation also continues to be weak, partly because of the effects of wage moderation in many economies. Monetary policy is working.