peter praet : interview with bloomberg interview by mr peter praet, member of the executive board of the european central bank, with bloomberg, conducted by mr alessandro speciale, mr jeff black and mr jonathan ferro, and published on 17 november 2015. * * * how can we estimate the impact of the tragic events in paris? i would like first of all to express our profound sympathy for the victims. it ’ s something that concerns everybody. now when we talk about the possible impact on the economy, in general, we have to take a holistic view. it ’ s not so much the economy as the geopolitical environment that is impacted by these events. the impact remains to be seen, beyond the tragic events of last week. the main issue is the economic context of such events, which is a rather difficult one, we cannot deny that. it ’ s difficult because the euro area is still going through the aftermath of a balance sheet recession which started in 2008. as of today, the gdp of the euro area has still not recovered the level it had in 2008. that ’ s one thing, and the second thing is the management of immigration in europe which creates some strains at the political level in different countries. how is the next round of staff economic forecasts shaping up? it ’ s too early to tell, of course, because the teams are working on it. but let me say that when we look at the flow of information so far, the economy is still in a cyclical recovery. incoming data have been supportive to our base scenario. but we are also very well aware that downside risks are present and even that they may have increased in light of the weekend ’ s events. on the inflation side, the return to close - to - two - percent is at risk of being pushed backwards again. i know that today we just had the final data for october for inflation, we had 1. 1 for the core inflation and 0. 1 for headline inflation. but we remain in an environment of weak price pressures in the medium term. that has not really changed. we will have to see what the new projections show. hard data have been a little bit less encouraging. we see q3, which was more or less in line with what we were expecting, but on the low side of estimates. we also had, from the german side, slightly less positive news on the real economy. it ’ s not sufficient to say that the base scenario has

is a key issue. what would be the impact on the banking system of an even - more negative deposit rate? what we have seen is that there is a pressure on banks ‘ unit margins, but that ’ s been compensated by volume effects – as there is more activity in the banking sector thanks to the support of monetary policy to the recovery. nominal gdp has been better and npls have started to go down, and as a result banks have been able to reduce provisions. globally you would see that the net effect of those measures so far has been positive on bank profitability. bis central bankers ’ speeches inflation has repeatedly undershot your forecasts … it is key for a central bank to keep inflation expectations anchored, especially in a period of slack in the economy. and we have some signals that these inflation expectations are still fragile. is that still the case? i think it ’ s still the case. long - term inflation expectations remain fragile. i never said they are de - anchored, i don ’ t think they are, but there are risks and this is why we are considering further action. a possible de - anchoring of inflation expectations together with a lot of slack is a dangerous cocktail. a lot of the latest wave of commodity price declines is demand related. at some point in the recent past you had a supply side issue, which is a windfall for consumers, but now a significant part is also coming from weak global conditions. global growth this year will be the weakest since 2009. bis central bankers ’ speeches