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, 26 October 2017.
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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, today we conducted a thorough
assessment of the outlook for inflation, the risks surrounding this outlook and our monetary policy
stance. As a result, the Governing Council took the following decisions in pursuit of its price
stability objective.
First, the were kept unchanged and we continue to expect them to
key ECB interest rates
remain at their present levels for an extended period of time, and well past the horizon of our net
asset purchases.
Second, 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 €60
billion until the end of December 2017. From January 2018 our net asset purchases are intended
to continue at a monthly pace of €30 billion until the end of September 2018, 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 the outlook becomes less favourable, or if financial
conditions become inconsistent with further progress towards a sustained adjustment in the path
of inflation, we stand ready to increase the APP in terms of size and/or duration.
Third, the Eurosystem will reinvest the principal payments from maturing securities purchased
under the APP for an extended period of time after the end of its net asset purchases, and in any
case for as long as necessary. This will contribute both to favourable liquidity conditions and to
an appropriate monetary policy stance.
And fourth, we also decided to continue to conduct the main refinancing operations and
threemonth longer-term refinancing operations as fixed rate tender procedures with full allotment for
as long as necessary, and at least until the end of the last reserve maintenance period of 2019.
Today's monetary policy decisions were taken to preserve the very favourable financing
conditions that are still needed for a sustained return of inflation rates towards levels that are
below, but close to, 2%. The recalibration of our asset purchases reflects growing confidence in
the gradual convergence of inflation rates towards our inflation aim, on account of the
increasingly robust and broad-based economic expansion, an uptick in measures of underlying
inflation and the continued effective pass-through of our policy measures to the financing
conditions of the real economy. At the same time, domestic price pressures are still muted
overall and the economic outlook and the path of inflation remain conditional on continued
support from monetary policy. Therefore, an ample degree of monetary stimulus remains
necessary for underlying inflation pressures to continue to build up and support headline inflation
developments over the medium term. This continued monetary support is provided by the
additional net asset purchases, by the sizeable stock of acquired assets and the forthcoming
reinvestments, and by our forward guidance on interest rates.
Let me now explain our assessment in greater detail, starting with the economic analysis. The
economic expansion in the euro area continues to be solid and broad-based. Real GDP
increased by 0.7%, quarter on quarter, in the second quarter of 2017, after 0.6% in the first
quarter. The latest data and survey results point to unabated growth momentum in the second
half of this year. Our monetary policy measures have facilitated the deleveraging process and
continue to support domestic demand. Private consumption is underpinned by rising
employment, which is also benefiting from past labour market reforms, and by increasing
household wealth. The upswing in business investment continues to benefit from very favourable
financing conditions and improvements in corporate profitability. Construction investment has
also strengthened. In addition, the broad-based global recovery is supporting euro area exports.
Risks surrounding the euro area growth outlook remain broadly balanced. On the one hand, the
strong cyclical momentum, as evidenced in recent developments in sentiment indicators, could
lead to further positive growth surprises. On the other hand, downside risks continue to relate
primarily to global factors and developments in foreign exchange markets.
Euro area annual HICP inflation remained unchanged at 1.5% in September. Looking ahead, on
the basis of current futures prices for oil, annual rates of headline inflation are likely to temporarily
decline towards the turn of the year, mainly reflecting base effects in energy prices. At the same
time, measures of underlying inflation have ticked up moderately since early 2017, but have yet to
show more convincing signs of a sustained upward trend. Wage growth has increased
somewhat, but domestic cost pressures still remain subdued overall. Underlying inflation in the
euro area is expected to continue to rise gradually over the medium term, supported by our
monetary policy measures, the continuing economic expansion, the corresponding gradual
absorption of economic slack and rising wage growth.
Turning to the monetary analysis, broad money (M3) continues to expand at a robust pace, with
an annual rate of growth of 5.1% in September 2017, after 5.0% in August. 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 9.7% in September 2017, up from
9.5% in August.
The recovery in the growth of loans to the private sector observed since the beginning of 2014 is
proceeding. The annual growth rate of loans to non-financial corporations increased to 2.5% in
September 2017, after 2.4% in August, while the annual growth rate of loans to households
remained stable at 2.7%. The euro area bank lending survey for the third quarter of 2017
indicates that net loan demand has continued to increase for all loan categories. Credit
standards have further eased for loans to households, while they remained broadly unchanged
for loans to enterprises. Banks' overall terms and conditions on new loans have continued to
ease for all categories of loans.
The pass-through of the monetary policy measures put in place since June 2014 continues to
significantly support borrowing conditions for firms and households, access to financing -
notably for small and medium-sized enterprises - and 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 recalibrate the policy instruments to ensure
the degree of monetary accommodation necessary to secure a sustained return of inflation rates
towards levels that are below, but close to, 2%.
In order to reap the full benefits from our monetary policy measures, other policy areas must
contribute decisively to strengthening the longer-term growth potential and reducing
vulnerabilities. The implementation of structural reforms in all euro area countries needs to be
substantially stepped up to increase resilience, reduce structural unemployment and boost euro
area productivity and growth potential. Regarding fiscal policies, all countries would benefit from
intensifying efforts towards achieving a more growth-friendly composition of public finances. A
full, transparent and consistent implementation of the Stability and Growth Pact and of the
macroeconomic imbalance procedure over time and across countries remains essential to
increase the resilience of the euro area economy. Strengthening Economic and Monetary Union
remains a priority. The Governing Council welcomes the ongoing discussions on further
enhancing the institutional architecture of our Economic and Monetary Union.
We are now at your disposal for questions.