Mario Draghi: ECB press conference - introductory statement
Introductory statement by Mr Mario Draghi, President of the European Central Bank, and Mr Vítor
Constâncio, Vice-President of the European Central Bank, Frankfurt am Main, 8 December 2016.
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Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press
conference. We will now report on the outcome of today's meeting of the Governing Council,
which was also attended by the Commission Vice-President, Mr Dombrovskis.
Based on our regular economic and monetary analyses, we today conducted a comprehensive
assessment of the economic and inflation outlook and our monetary policy stance. As a result,
the Governing Council took the following decisions in the pursuit of its price stability objective:
As regards non-standard monetary policy measures, we will continue to make purchases
under the asset purchase programme (APP) at the current monthly pace of €80 billion until the
end of March 2017. From April 2017, our net asset purchases are intended to continue at a
monthly pace of €60 billion until the end of December 2017, or beyond, if necessary, and in any
case until the Governing Council sees a sustained adjustment in the path of inflation consistent
with its inflation aim. If, in the meantime, the outlook becomes less favourable, or if financial
conditions become inconsistent with further progress towards a sustained adjustment of the path
of inflation, the Governing Council intends to increase the programme in terms of size and/or
duration. The net purchases will be made alongside reinvestments of the principal payments
from maturing securities purchased under the APP.
To ensure the continued smooth implementation of the Eurosystem's asset purchases, the
Governing Council decided to adjust the parameters of the APP as of January 2017 as follows.
First, the maturity range of the public sector purchase programme will be broadened by
decreasing the minimum remaining maturity for eligible securities from two years to one year.
Second, purchases of securities under the APP with a yield to maturity below the interest rate on
the ECB's deposit facility will be permitted to the extent necessary.
The were kept unchanged and we continue to expect them to remain at
key ECB interest rates
present or lower levels for an extended period of time, and well past the horizon of our net asset
purchases.
Today's extension of the asset purchase programme has been calibrated to preserve the very
substantial degree of monetary accommodation necessary to secure a sustained convergence
of inflation rates towards levels below, but close to, 2% over the medium term. Together with the
sizeable volume of past purchases and forthcoming reinvestments, it ensures that financial
conditions in the euro area will remain very favourable, which continues to be crucial to achieve
our objective. In particular, the extension of our purchases over a longer horizon allows for a
more sustained market presence and, therefore, a more lasting transmission of our stimulus
measures. This calibration reflects the moderate but firming recovery of the euro area economy
and still subdued underlying inflationary pressures. The Governing Council will closely monitor
the evolution of the outlook for price stability and, if warranted to achieve its objective, will act by
using all the instruments available within its mandate.
Let me now explain our assessment in greater detail, starting with the economic analysis. Real
GDP in the euro area increased by 0.3%, quarter on quarter, in the third quarter of 2016, following
similar growth in the second quarter. Incoming data, notably survey results, point to a
continuation of the growth trend in the fourth quarter of 2016. Looking further ahead, we expect
the economic expansion to proceed at a moderate but firming pace. The pass-through of our
monetary policy measures to the real economy is supporting domestic demand and has
facilitated deleveraging. Improvements in corporate profitability and very favourable financing
conditions continue to promote a recovery in investment. Moreover, sustained employment
gains, which are also benefiting from past structural reforms, provide support for households'
real disposable income and private consumption. At the same time, there are indications of a
somewhat stronger global recovery. However, economic growth in the euro area is expected to
be dampened by a sluggish pace of implementation of structural reforms and remaining balance
sheet adjustments in a number of sectors.
This assessment is broadly reflected in the December 2016 Eurosystem staff macroeconomic
projections for the euro area, which foresee annual real GDP increasing by 1.7% in 2016 and
2017, and by 1.6% in 2018 and 2019. Compared with the September 2016 ECB staff
macroeconomic projections, the outlook for real GDP growth is broadly unchanged. The risks
surrounding the euro area growth outlook remain tilted to the downside.
According to Eurostat's flash estimate, euro area annual HICP inflation in November 2016 was
0.6%, up further from 0.5% in October and 0.4% in September. This reflected to a large extent an
increase in annual energy inflation, while there are no signs yet of a convincing upward trend in
underlying inflation. Looking ahead, on the basis of current oil futures prices, headline inflation
rates are likely to pick up significantly further at the turn of the year, mainly owing to base effects
in the annual rate of change of energy prices. Supported by our monetary policy measures, the
expected economic recovery and the corresponding gradual absorption of slack, inflation rates
should increase further in 2018 and 2019.
This pattern is also reflected in the December 2016 Eurosystem staff macroeconomic
projections for the euro area, which foresee annual HICP inflation at 0.2% in 2016, 1.3% in 2017,
1.5% in 2018 and 1.7% in 2019. By comparison with the September 2016 ECB staff
macroeconomic projections, the outlook for headline HICP inflation is broadly unchanged.
Turning to the monetary analysis, broad money (M3) growth moderated in October 2016, with
its annual rate of growth decreasing to 4.4%, after 5.1% in September. As in previous months,
annual growth in M3 was mainly supported by its most liquid components, with the narrow
monetary aggregate M1 expanding at an annual rate of 7.9% in October, after 8.4% in
September.
Loan dynamics followed the path of gradual recovery observed since the beginning of 2014. The
annual rate of change of loans to non-financial corporations increased to 2.1% in October 2016,
from 2.0% in the previous month. The annual growth rate of loans to households remained at
1.8%. Although developments in bank credit continue to reflect the lagged relationship with the
business cycle, credit risk and the ongoing adjustment of financial and non-financial sector
balance sheets, the monetary policy measures put in place since June 2014 are significantly
supporting borrowing conditions for firms and households and thereby credit flows across the
euro area.
To sum up, a cross-check of the outcome of the economic analysis with the signals coming
from the monetary analysis confirmed the need to take today's monetary policy decisions so as
to preserve the very substantial amount of monetary support that is necessary in order to secure
a return of inflation rates towards levels that are below, but close to, 2% without undue delay.
Monetary policy is focused on maintaining price stability over the medium term and its
accommodative stance supports economic activity. As emphasised repeatedly by the Governing
Council, in order to reap the full benefits from our monetary policy measures, other policy areas
must contribute much more decisively, both at the national and at the European level. The
implementation of structural reforms in particular needs to be substantially stepped up to
reduce structural unemployment and boost potential output growth in the euro area. Structural
reforms are necessary in all euro area countries. The focus should be on actions to raise
productivity and improve the business environment, including the provision of an adequate public
infrastructure, which are vital to increase investment and boost job creation. The enhancement of
current investment initiatives, progress on the capital markets union and reforms that will
improve the resolution of non-performing loans will also contribute positively to this objective. In
an environment of accommodative monetary policy, the swift and effective implementation of
structural reforms will also make the euro area more resilient to global shocks. Fiscal
should also support the economic recovery, while remaining in compliance with the
policies
fiscal rules of the European Union. Full and consistent implementation of the Stability and Growth
Pact over time and across countries remains crucial to ensure confidence in the fiscal
framework. At the same time, it is essential that all countries intensify efforts towards achieving a
more growth-friendly composition of fiscal policies.
We are now at your disposal for questions.