As Paschal just said, we started by discussing the latest inflation developments.
Since October 2023, euro area inflation has been declining to reach 2.4% in March, according to Eurostat's flash estimate. The reduction has been broad based and we expect inflation to continue on this trajectory in the coming quarters.
So this is overall good news for households across Europe – and bodes well for a strengthening of economic activity in the second half of the year, as we forecast in February.
We consider that there are both downside and upside risks to this outlook and to the central scenario of a steady return towards the ECB's target. On the one hand, there are some risks that the disinflation progress may slow down. On the other hand there are also some risks of overshooting the target. Stronger or more persistent transmission of the still tight monetary conditions or effects related to geopolitical tensions could weight on aggregate demand and this could push inflation lower. But we remain on balance confident that inflation will continue to decline.
By contrast, we have seen yesterday's figures for the US, where inflation rose higher than expected to 3.5% in March, up from 3.2% in February. So this is certainly something that we will continue to watch closely.
Secondly, we had an important discussion this afternoon about trade and competitiveness with a very interesting presentation from Professor Baldwin.
I think we are all aware that the euro area has benefitted from its strong integration in the global economy. We are still convinced that external trade and investment are helping to boost productivity and living standards.
At the same time, we know that the rise in geopolitical tensions and the surge in energy prices have had a clear impact on global trade dynamics.
So the euro area needs to navigate the trade-offs between supporting productivity and improving economic security, and to harness its trade instruments within our rules-based multilateral system.
I think we are aware of the fact that what we call decoupling is not happening, at least not happening in a broad sense, and it is probably even impossible in a broad sense. This formula - that it is about derisking and not decoupling - that is very popular now is, I think, the right thing for the progress of the economy and for Europe in particular.
Lastly, the Commission and the ECB updated Ministers on the progress of our proposals on the digital euro. Member States have discussed all essential elements of our proposal in the Council, with some progress having been made under the Spanish Presidency, which is now continuing under the Belgian Presidency. We expect discussions within the Council to be concluded around mid-2024.
In the Parliament, discussions have been progressing but a plenary vote is only expected in the next legislature.
Progress has also been made on our legislative proposal on the legal tender of euro banknotes and coins. You know these proposals were made in parallel.
To recall, this proposal codifies and clarifies the judgment by the European Court of Justice which sets out the principles of legal tender and protects people's right to use and have access to cash. Because a digital euro would complement and not replace cash.
