Although it says it is thinking “360 degrees” on the unconventional measures, the ECB currently looks powerless to put through new measures able to restore transmission channels for its monetary policy and, hence, to improve conditions for financing the private sector and, thus, supporting the real economy. And yet, downside risks are accumulating to both economic activity and price stability over the medium term and call for additional support from the ECB. In light of this, the 25bp key rate cut that is expected to accompany revised growth projections in June – and even as early as its next meeting, on 2 May, if economic indicators worsen further, looks like a decision by default, as the ECB itself has acknowledged its apparently limited effectiveness.
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