Incoming information since the last Governing Council meeting in early December is in line with the Governing Council's baseline scenario of ongoing, but moderate, growth of the euro area economy.

In particular, the weakness in the manufacturing sector remains a drag on euro area growth momentum.

At the same time, ongoing, albeit decelerating, employment growth and increasing wages continue to support the resilience of the euro area economy.

The risks surrounding the euro area growth outlook, related to geopolitical factors, rising protectionism and vulnerabilities in emerging markets, remain tilted to the downside, but have become less pronounced

While inflation developments remain subdued overall, there are some signs of a moderate increase in underlying inflation in line with expectations.

The unfolding monetary policy measures are underpinning favourable financing conditions for all sectors of the economy.

In particular, easier borrowing conditions for firms and households are supporting consumer spending and business investment.

This will sustain the euro area expansion, the build-up of domestic price pressures and, thus, the robust convergence of inflation to the Governing Council's medium-term aim.