Due to the escalation of trade tensions we are witnessing a significant slowdown in global trade [Slide]: in its latest World Economic Outlook, the IMF expects the slowest global growth since 2008–2009 [Slide]. The loss of global growth due to the trade war could reach up to 0.8% next year, due mainly to its indirect effects, beyond tariffs: fall in business confidence and investment, decrease in productivity. Similarly, the twists and turns of Brexit have created volatility in UK quarterly growth, and weighed on business investment. Despite this gloomy context, the French economy is resilient, with growth at 1.3% close to its potential. Purchasing power per capita should accelerate sharply in 2019 (2.3%), due to the strength of labour income – 1 million jobs have been created over the past four years – and the fiscal stimulus. But – as a whole – the euro area is acutely affected, primarily due to the weight of Germany – with growth of only 0.4% expected this year. Of course Germany is highly specialised in the manufacture of capital goods and “overexposed” to global trade – German exports account for around 50% of GDP. Combined with a radical upheaval of the car industry, these phenomenon nearly constitute an asymmetric shock for the German economy. II. The recent monetary policy controversy is of little interest for the future Over the past few years, monetary policy has played its full part in helping Europe weather the storm.
We now expect rates to remain at their present levels of –0.5%, or lower, until the inflation outlook robustly converges to a level sufficiently close to, but below, 2%, and this convergence has been consistently reflected in underlying inflation dynamics. Besides, this strengthening of our forward guidance implies the consequent prolongation of the reinvestment period for the very important stock of QE assets – 2600 billion euros. The tiering system will help us mitigate the possible side effects that negative rates might have on banks’ profitability, which is crucial to protect the transmission of our monetary policy through the bank-lending channel. The Governing Council’s discussion at the start of September is now behind us; everyone has expressed themselves legitimately – I have explained my own reservations on one part of the package –; but the decisions were taken equally legitimately, and they provide clarity well into the future. Have no doubt: we are committed, and the whole package will be implemented. We must now look resolutely forward, with three strong elements of consensus around Mario Draghi today and Christine Lagarde tomorrow: we have to maintain an accommodative monetary policy in the face of the economic slowdown and low inflation. Second, a review of our monetary policy framework in this environment will be very welcome. And third, it is very desirable that fiscal policy now prolongs this monetary support, wherever that is possible in Europe. It is time to turn the page, and turn to the future. III.