peter praet : preserving monetary accommodation in times of normalisation speech by mr peter praet, member of the executive board of the european central bank, on " herausforderungen fur die europaische geldpolitik 2019 " at 33. internationales zinsforum 2018, frankfurt am main, 26 november 2018. * * * introduction in the aftermath of the global financial crisis, central banks have successfully fended off deflationary forces and supported economic recovery. 1 they have brought down policy rates to their effective lower bound and, importantly, have made use of a broad set of unconventional monetary policy measures in pursuit of their statutory objectives. in advanced economies, monetary policies have borne fruit, but their monetary policy cycles clearly differ substantially, reflecting different stages of recovery and degrees of progress towards achieving the central bank ’ s statutory objectives. in a number of places, central banks have already tightened their monetary policy stance ; unconventional monetary policy measures have been wound down and policy rates have been gradually increased. in the euro area, however, significant monetary policy stimulus is still needed to support the further build - up of inflationary pressures and headline inflation developments over the medium term. at the meeting of the ecb ’ s governing council in june, we gave an important signal of a normalisation of our policy instruments. we communicated our anticipation that, subject to incoming data confirming our medium term inflation outlook, we would end net purchases under our asset purchase programme ( app ) after december 2018. today i would like to address our key challenge in normalising our monetary policy instruments : preserving monetary accommodation, while switching back from net asset purchases to forward guidance on policy rates as the main instrument to steer our monetary policy stance. while this rotation proceeds, we will continue to operate with multiple, complementary instruments, including our policy of reinvesting the principal payment of securities purchased under the app. the state of the euro area economy following more than five years of increasingly broad - based economic expansion in the euro area, recent developments point to some loss of growth momentum. preliminary data show that euro area real gdp expanded by 1. 7 % year on year in the third quarter of 2018, down from 2. 2 % in the second quarter. the slowdown in euro area economic growth since the start of the year has reflected in no small part a retreat from the strong growth of 2017. one - off country - specific or sector - specific factors have also contributed to slowing production in recent months. but factors related to

stable. for example, the gini coefficient on net wealth increased only modestly, from 68. 0 % in 2010 to 68. 5 % in 2013. similarly, the share of the top 5 % of households on total net wealth remained between 37 % and 38 %. based on the evidence mentioned above, one could already draw some tentative implications for monetary policy. first, given the slow - moving nature of inequality, one could argue that the prevailing monetary policy regime, defining long term goals, is likely to be the most important factor through which central banks may influence the distribution of income and wealth. for example, the conquest of inflation in countries going through prolonged experiences of high inflation is arguably an important factor contributing to the reduction in inequality. the second tentative implication is that, for a given monetary policy framework committed to a low inflation regime, the specific measures adopted to respond to cyclical developments are unlikely to significantly alter inequality. it is useful to bear in mind these considerations when discussing a topic that has recently received much attention in the public debate, i. e. how non - standard monetary policies, such as those undertaken in the recent years by the european central bank, affect the welfare of individual households. more specifically, to what extent non - standard monetary policies affect wealth inequality and income inequality in the short - and medium run? which households benefit from those policies and how much? despite the two tentative conclusions above, i do not intend to simply brush aside this debate. indeed, while measures such as the top shares and gini coefficients are important to consider when thinking about inequality, they can sometimes mask specific dimensions of household heterogeneity, such as those along demographic or socioeconomic characteristics, which can be investigated in data from household surveys ( containing additional information beyond the data on income ). for example, it is possible to analyse to what extent not only the gini coefficients, but also income and wealth of individual households react to changes in the unemployment rate or to increased growth of wages and asset prices. 11 let me provide some new empirical evidence on this topic based on ongoing work at the ecb by lenza and slacalek. 12 more specifically, they quantified how the ecb ’ s recent asset purchase programmes ( app ) affected the income and wealth of individual households in the four largest euro area countries, combining aggregate and household - level data. first, they estimate the effects of the ecb ’ s unconventional monetary policy on components of household income and wealth using