Mr Duisenberg reports on the outcome of the latest meeting of the ECB Governing Council  (Central Bank Articles and Speeches, 6 May 1999)
Central bank: ecb | Type: speech | Date: 1999-05-06

## Mr

Duisenberg reports on the outcome of the latest meeting of the ECB Governing CouncilIntroductory statement by the President of the European Central Bank, Dr W F Duisenb the press conference held in Frankfurt on 6 May 1999.Ladies and gentlemen, the Vice-President and I are here today to report on the ou today's meeting of the Governing Council of the ECB.The Governing Council reviewed, as usual, the main monetary, financial and other economic indicators in line with its monetary policy strategy.

Following this discus decided to keep the ECB's interest rates unchanged.

The interest rate on the main re operations will thus remain 2.5%.

In addition, the interest rate on the marginal len will continue to be 3.5% and that on the deposit facility will remain 1.5%.

Let me some details about our latest assessment of the monetary policy stance and thereby explanations for the decisions taken today.Overall, monetary developments and our broadly based assessment of future p developments do not signal dangers to price stability over the short and medium term.With regard to monetary developments in the euro area, in March 1999 the 12-month rate growth of M3 remained constant at 5.1%.

While the pace of increase in overnight d reduced further, signalling the waning influence of the uncertainties surrounding th the euro, deposits with an agreed maturity of up to two years grew at a stronger pac than in February 1999.

The latest figure for the three-month moving average of M3 covering the first quarter of 1999, was 5.2%.

This was 0.2 percentage point higher t previous three-month period, covering the period December 1998 to February 1999.

Governing Council also noted that the annual rate of growth of total credit was broa at 7.5% in March 1999.

In line with the assessment it had made on the occasion of its meetings, the Governing Council took the view that recent monetary trends should not as a warning signal with regard to the future evolution of inflation.

As we have emp the past, the monetary data in early 1999 may be affected by the special circumstanc to the changeover to Stage Three of EMU.

In addition, the three-month moving average growth remains relatively close to the reference value of 4½%.As regards financial indicators , I should like to stress that recent developments in bond in the euro area were accompanied by some decoupling of yields from those in the States, as differentials between euro area long-term interest rates and comparable United States have widened.As regards the evolution of the world economy , recent developments tend to confirm the picture of a mild overall improvement in the external environment beyond the euro a before, however, the main features range from continuously strong growth of the US e to continuously weak output in Japan.For the euro area , only a few additional data for economic indicators have become avai and the assessment of forthcoming GDP developments is currently complicated by the that the next release will be based on revised data in accordance with the new conc European System of Accounts (ESA 95).

Industrial production declined at the beginning of this year, and data on retail sales volumes suggest that the pace of growth slowed down somewhat around the turn of the year, but recently there are preliminary indication improvement.

Recent developments in the labour market show a somewhat deceleratemployment growth towards the end of last year.

The rate of unemployment remained unchanged in March 1999, following two consecutive declines in January and February.

Industrial confidence declined further in the first quarter of 1999, but preliminary Apr figures from the European Commission point to a slight improvement.

Given the lates developments up to April, it would appear that consumer confidence reached a peak at the beginning of this year since when it has moderated slightly.As expected, the trend towards decreasing inflation rates appears to have been reverse March.

In March the annual rate of increase of consumer prices as measured by th Harmonised Index of Consumer Prices (HICP) was 1.0%, compared with 0.8% in the previous four months.

This was essentially a consequence of the substantial rise in oil which began in mid-February feeding through to energy prices in the HICP.

In additio unprocessed food prices have continued to exert some upward pressure on overall pric increases in recent months.

Excluding the more volatile HICP components of energy and food, the rate of increase in consumer prices in March remained at 1.1% - i.e. unchanged the rate observed in February and marginally lower than that recorded at the turn of theIn conclusion , at this point in time the general outlook for price stability remains favou Although the lower effective exchange rate of the euro and the rise in oil prices may l some upward pressure on headline HICP inflation in the coming months, the current economic situation is likely to contribute to containing this upward pressure.

At the time, current monetary developments and other available indicators do not point inflationary risks over the medium term.

On the basis of this assessment the Govern Council decided to keep the ECB's interest rates at their current levels.In addition to reviewing the main monetary, financial and other economic indicators, Governing Council considered a report prepared by the ECB's Banking Supervision Committee on 'The effects of technology on the EU banking systems'.

The report assesses the extent to which technological developments have taken place and are expected to occur the EU banking systems, the main categories of banking risks affected by these developmen and the strategic responses that EU banks are devising.

The Governing Council agreed publish the report, which will be made available in due course.