ECB Blog Write a blog predicting a forthcoming interest rate decision by the ECB Governing Council and explain your decision based on your own assessment of the key economic indicators available, economic and monetary conditions in the euro area, and the inflation outlook.
Preparation Tips Make a list of economic indicators the ECB considers using real time data – both in economic and monetary analysis Important indicators include: output, demand and the labour market; prices and costs; fiscal policy;
the external environment; monetary and financial developments; financial market conditions Make an assessment of the likely effect of each indicator in terms of pushing inflation up or tempering it, with a forward-looking perspective.
Assign a + or –sign to each indicator, indicating whether the development has recently contributed to pushing inflation up or to tempering it, with a forward-looking perspective. Accompany the + and – signs with some remarks on the importance of each indicator.
Take into account the fact that the timing of changes in an indicator, relative to how the economy in the euro area, as a whole, changes, varies across different economic indicators, i.e. some indicators are leading while others are lagging.
This is an important consideration when assessing inflation pressures and looking ahead. Using this list of economic indicators – try to sum up the overall risks to price stability, looking ahead.
Cross-check against the monetary analysis for a longer-term outlook for inflation, drawing attention to the long-run link between money and prices. Prepare your analysis of the risks to price stability over the medium term using the main conclusions from this exercise Based on this analysis, outline the different instruments the ECB might use to implement its monetary policy, focusing on types of transaction, maturity and frequency.
How does this predicted ECB monetary policy contribute to the ECB’s primary objective? Resources: A couple of the latest introductory statements could be used to see which indicators have received the most attention lately The latest Economic Bulletin could also be used for an overview of recent trends The lastest Monetary Policy Account could be used to see what indicators were considered and what impact they were expected to have on inflation.
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