Mr Duisenberg reports on the latest meeting of the ECB Governing Council  (Central Bank Articles and Speeches, 4 Feb 99)
Central bank: ecb | Type: speech | Date: 1999-02-04

## Mr. Duisenberg reports on the latest meeting of the ECB Governing CouncilIntroductory statement by the President of the European Central Bank, Mr W F Duisenbe the press conference in Frankfurt 4/2/99.Ladies

and gentlemen, the Vice-President and I are here today to report on the out today's meeting of the Governing Council of the European Central Bank.Let me start with the Governing Council's discussion on recent economic developments a decisions that the Governing Council has taken today in the field of monetary policy.At today's meeting the Governing Council reviewed the latest monetary, financial and ec developments.

After a careful examination of recent trends, in the context of its mone strategy, it confirmed its earlier assessment that the outlook for price stabil favourable.

Therefore, it decided that for the main refinancing operations to be settle 17 February 1999 the same conditions will apply as for the first such operations sett this year, i.e. they will be fixed rate tenders conducted at an interest rate of 3.0%. interest rate on the marginal lending facility continues to be 4.5% and the interest deposit facility remains 2.0%.Let me report in more detail on the Governing Council's deliberations and thereby pro explanations for the decisions which were taken today.On 1 February 1999 we released the latest data on monetary developments in the euro These data confirmed the continuation of a favourable outlook for price stability in th The latest three-month moving average of annual M3 growth rates (covering the period October to December 1998) was 4.7%.

This result was unchanged from the average over period from September to November 1998 and remained very close to the reference valu broad money growth of 4½% set by the Governing Council.Developments in the narrow aggregate M1 have been more buoyant recently.

Similarly, growth of credit to the private sector continued to be high in December 1998. developments seem to reflect, in particular, the current low levels of interest rate area.

Although they are not considered by the Governing Council to imply inflationary this juncture, in particular the developments in credit growth will need to be carefull in the coming months.With regard to the broadly based outlook for price developments and risks to price stab euro area, financial market indicators suggest that market participants continue to inflation.

Since early January, euro area long-term interest rates have continued to the yield curve has shifted downwards.At the same time, the latest developments are giving mixed signals as to the evoluti world economy in 1999.

On the one hand, recent events in Brazil have highlighted the fr the current situation in emerging markets, while on the other, output growth in the Un was much stronger in the last quarter of 1998 than expected.

In the euro area too, indicators continue to suggest a mixed picture.

According to revised Eurostat estim GDP growth remained broadly robust in the third quarter of 1998, while in more recent activity may have slowed down.

Such a slowdown is apparent in industrial production gro to November 1998, in particular in the intermediate goods sector, which is particularl to any deterioration in the external environment.

However, at the same time, produ capital goods and consumer durables has continued to expand rather strongly.

A similar can be observed in the decline in industrial confidence that has been apparent in theof 1998 in the euro area, while, however, stabilising in January 1999.

On the oth consumer confidence in the euro area continued to increase in December and in January now exceeded the peak level reached in 1990, with retail sales up to November sh continued solid growth and car sales growing strongly during the last months of 1998. the mixed picture is confirmed by other data.

Order books, which overall declined sligh in December, apparently increased again in January, particularly with respect to expo Capacity utilisation in the manufacturing sector, which started to decrease in the t recovered again thereafter, while December data on unemployment appear to suggest th decline in unemployment rates stalled around year-end.Therefore, with regard to the cyclical situation, recent data seem to confirm o assessment that there are downside risks for output growth and that production may have down around the turn of the year.

Nonetheless, in the opinion of the Governing Council also no clear signals as yet of a stronger than expected weakening in output growth. mixed picture outlined above, the Governing Council emphasised that further thorough a and very close monitoring of underlying trends are needed before any conclusions can b concerning the broad outlook for 1999 and 2000.With regard to the latest data on the Harmonised Index of Consumer Prices, the annual for December 1998 showed a further slowdown to 0.8%, compared with 0.9% in November an 1.0% in October.

This development was in line with previous trends; i.e. it was due ma further reduction in energy prices and also, in December, to a decline in the price non-energy industrial goods.

Taking a forward-looking perspective, the general envir continues to suggest that there are no significant upward or downward pressures on pric short term.

Furthermore, the pattern of risks to price stability has remained broadly On the one hand, downward risks could materialise if import or producer prices were further.

On the other, given current wage demands, wage developments, especially measured in real terms, could become a matter of concern and fiscal policies would als threat to the favourable outlook for prices and growth and employment prospects, credibility of the Stability and Growth Pact were undermined.

In addition, exchange ra need to be monitored closely given their importance for domestic price developments.In conclusion, taking into account the latest evidence available, the Governing Counci altered its assessment of the outlook for price developments.

The Governing Council t decided to keep ECB interest rates unchanged at the levels currently prevailing.I should like to take this opportunity to recall that real three-month interest rates, nominal rates corrected for current HICP inflation (as a very incomplete proxy), stood of 2.3% in January; this is approximately 80 basis points lower than the level one ye the same time, real long-term interest rates, measured on a similar basis, have reache 3.0%, which is around 110 basis points lower than in early 1998.

These levels are very in comparison with other countries and with historical data for the euro area.

Mone financial conditions therefore support continued economic growth in the euro area in price stability.I should now like to inform you about some other matters considered by the Governing CoThe end-of-day procedures relating to TARGET and access to the Eurosystem's stand facilities were reviewed by Governing Council today.

The Governing Council agreed that tomorrow on the deadline for requesting access to the marginal lending facility will coi the deadline for access to the deposit facility, i.e. 30 minutes after the actual c TARGET.

Furthermore, the deadlines for requesting access to the Eurosystem's stanfacilities will be postponed by an additional 30 minutes on the last Eurosystem busines minimum reserve maintenance period.As a final point, I should like to inform you that the ECB is planning an information with regard to the launch of the euro banknotes on 1 January 2002.

One of our a undertaking such an exercise will be to ensure that, by the time the euro banknotes available, every person using and handling them will be fully acquainted with their f the extent that everyone will be able to identify the banknotes as being genuine.

In t the ECB will be co-operating with the European Commission and the Member States to en that there will be no duplication of effort.