Glossary

Inflation rates expected by different categories of economic agents (households, business leaders, financial market participants) for different time horizons (1 year, 3 years, 5 years, 10 years, etc.).

Account recording a country’s main transactions with the rest of the world. The current account balance is the sum of the balance of trade in goods and services, and net transfers of primary and secondary income. 

Main decision-making body of the European Central Bank. It is comprised of the six members of the Executive Board and the governors of the national central banks of the euro area countries.

Capacity of a country to win export market shares or meet its domestic demand. It depends both on domestic production costs and on “non-cost” factors such as the quality of the country’s goods and services.

A measure of inflation that provides a fundamental trend in price developments. It reflects the underlying changes in production costs and the match between supply and demand. Core inflation is therefore more appropriate for analysing inflationary pressures, as it is less affected by exogenous factors.

Decline in the general price level.

Decline in the rate of inflation (a fall in the rate of growth of the average level of prices).

Technology enabling the use of distributed ledgers (decentralised databases, managed consensually by participants, that are used to record transactions on nodes).

Share of the total working age population that is in work, expressed as a percentage.

A drain on a country’s economy due to an increase in the price of goods that the country must import.

The European Central Bank and the national central banks of the countries that have adopted the euro.

Main decision-making body of the European Central Bank. It is comprised of the six members of the Executive Board and the governors of the national central banks of the euro area countries.

A price index with a definition and methodology harmonised across the European Union, allowing for comparisons between countries.

Share of household income available for consumption, investment or saving. It includes earned income net of social security contributions, unemployment benefit, retirement pensions, income from wealth, and social transfers and benefits, net of direct taxes.

The automatic adjustment of a price or wage based on a given economic index.

A measure of inflation that provides a fundamental trend in price developments. It reflects the deep evolution in production costs and the match between supply and demand. Underlying inflation is therefore more appropriate for analysing inflationary pressures, as it is less affected by exogenous factors.

Inflation rates expected by different categories of economic agents (households, business leaders, financial market participants) over different time horizons (1 year, 3 years, 5 years, 10 years, etc.).

Interest rates set by the central bank of a country or monetary union. In the euro area, the European Central Bank sets three key interest rates: the deposit facility rate, the main refinancing operations rate, and the marginal lending facility rate.

Capital requirements defined for banks by the European regulation (CRR [Capital Requirements Regulation] including notably the Basel Committee international regulatory framework), integrating individual requirements depending on the risk profile and additional requirements depending on the so-called “macroprudential” risks identified at the level of the financial system (additional reserves, also known as “buffers” – which can be used in times of crisis).

Measures of the amount of money in circulation. The Eurosystemmonitors three aggregates, from most to least liquid :

• M1 = coins + banknotes + overnight deposits ;
• M2 = M1 + deposits with an agreed maturity of up to 2 years ;
• M3 = M2 + repurchase agreements, shares or units in funds + debt securities with a maturity not exceeding 2 years.

A value that divides a distribution into two equal parts. For example, in a distribution of wages, 50% of wages are below the median value and 50% are above it.

A measure of the level of profitability of a company or sector. In national accounting, the ratio of gross operating surplus to value added.

The theoretical level of the interest rate at which monetary inflation neither accelerates nor slows.

The rate of growth of gross domestic product (GDP) that an economy can theoretically achieve by fully utilising its production capacity without creating inflationary pressures.

Characteristic of IT protocols developed on distributed ledgers that enable instructions to be executed automatically when certain pre-defined conditions are met (smart contracts).

The amount of goods and services that can be purchased with income; it therefore depends on both the level of income and the level of prices.

A set of government measures aimed to protect consumers and businesses from excessive price increases, especially in energy (gas, electricity, fuel, etc.).

The rate of growth of gross domestic product (GDP) that an economy can theoretically achieve by fully utilising its production capacity without creating inflationary pressures.

Financing clause that grants equal rights to all creditors. The debtor/issuer undertakes to treat all creditors of the same rank equally.

These measure the purchasing power of nominal wages by adjusting the latter for the change in the general price level.

The real or “economic” cost of credit (as opposed to the nominal or “financial” cost), which is calculated by deducting observed or expected inflation from the nominal interest rate.

Financial technique consisting in selling financial assets such as bank loans to a special purpose vehicle and issuing financial securities backed by these assets.

Transfers paid (in the form of money or services) to individuals or families to lower the financial burden of protecting themselves against different risks (e.g. retirement pensions, health insurance, family benefits, unemployment benefit, housing benefit, guaranteed minimum income, etc.).

Issuance of financial assets in the form of digital tokens using distributed ledger technology.

Share of GDP that is not explained by the volume of capital and labour used in the production process; it measures the overall efficiency of the production process.

The maximum rate reached at the end of a phase of policy rate hikes by the central bank.

Share of the labour force (employed and unemployed active population) that is unemployed, expressed as a percentage.

Financing of the creation or development of a risky but high potential business.

Investment product that allows investors to take a capital stake in companies with high growth potential. Venture capital funds are managed by investment management firms.