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, Barcelona, 3 May 2012.
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Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our
press conference. I would like to thank Governor Fernández Ordóñez for his kind hospitality
and express our special gratitude to his staff for the excellent organisation of today's meeting
of the Governing Council. 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 Rehn.
Based on our regular economic and monetary analyses, we decided to keep the key ECB
interest rates unchanged. Inflation rates are likely to stay above 2% in 2012. However, over
the policy-relevant horizon, we expect price developments to remain in line with price
stability. Consistent with this picture, the underlying pace of monetary expansion remains
subdued. Available indicators for the first quarter remain consistent with a stabilisation in
economic activity at a low level. Latest survey indicators for the euro area highlight prevailing
uncertainty. Looking ahead, economic activity is expected to recover gradually over the
course of the year. At the same time, as we said previously, the economic outlook continues
to be subject to downside risks.
Inflation expectations for the euro area economy continue to be firmly anchored in line with
our aim of maintaining inflation rates below, but close to, 2% over the medium term. Over the
last few months we have implemented both standard and non-standard monetary policy
measures. This combination of measures has helped both the financial environment and the
transmission of our monetary policy. Further developments will be closely monitored, keeping
in mind that all our non-standard monetary policy measures are temporary in nature and that
we maintain our full capacity to ensure medium-term price stability by acting in a firm and
timely manner.
Let me now explain our assessment in greater detail, starting with the economic analysis.
Available indicators for the first quarter remain consistent with a stabilisation in economic
activity at a low level. Latest signals from euro area survey data highlight prevailing
uncertainty. At the same time, there are indications that the global recovery is proceeding.
Looking beyond the short term, we continue to expect the euro area economy to recover
gradually in the course of the year, supported by foreign demand, the very low short-term
interest rates in the euro area, and all the measures taken to foster the proper functioning of
the euro area economy. However, remaining tensions in some euro area sovereign debt
markets and their impact on credit conditions, as well as the process of balance sheet
adjustment in the financial and non-financial sectors and high unemployment, are expected
to continue to dampen the underlying growth momentum.
As we said previously, this economic outlook continues to be subject to downside risks,
relating in particular to an intensification of tensions in euro area debt markets and their
potential spillover to the euro area real economy, as well as to further increases in
commodity prices.
Euro area annual HICP inflation was 2.6% in April 2012, according to Eurostat's flash
estimate, after 2.7% in the previous four months. Inflation is likely to stay above 2% in 2012,
mainly owing to increases in energy prices, as well as to rises in indirect taxes. On the basis
of current futures prices for commodities, annual inflation rates should fall below 2% again in
early 2013. In this context, we will pay particular attention to any signs of pass-through from
higher energy prices to wages, profits and general price-setting. However, looking ahead, in
an environment of modest growth in the euro area and well-anchored long-term inflation
expectations, underlying price pressures should remain limited.
Risks to the outlook for HICP inflation rates in the coming years are still seen to be broadly
balanced. Upside risks pertain to higher than expected commodity prices and indirect tax
increases, while downside risks relate to weaker than expected developments in economic
activity.
The monetary analysis indicates that the underlying pace of monetary expansion has
remained subdued, with somewhat higher growth rates in the past few months. The annual
growth rate of M3 was 3.2% in March 2012, compared with 2.8% in February. Since January
we have observed a strengthening in the deposit base of banks.
The annual growth rates of loans to non-financial corporations and loans to households
(adjusted for loan sales and securitisation) stood at 0.5% and 1.7% respectively in March,
both slightly lower than in February. The volume of MFI loans to non-financial corporations
and households remained practically unchanged compared with the previous month.
Money and credit data up to March confirm a broad stabilisation of financial conditions and
thereby, as intended by our measures, the avoidance of an abrupt and disorderly adjustment
in the balance sheets of credit institutions. In this context, the April bank lending survey
indicates that the net tightening of credit standards by euro area banks declined substantially
in the first quarter of 2012 as compared with late 2011, for both loans to non-financial
corporations and loans to households, also on account of improvements in funding
conditions for banks. As also indicated in the bank lending survey, the demand for credit
remained subdued in the first quarter of 2012, reflecting weak economic activity and the
ongoing process of balance sheet adjustment in non-financial sectors. The full supportive
impact of the Eurosystem's non-standard measures will need time to unfold and to have a
positive effect on the growth of loans when demand recovers. In this context, it should be
noted that the second three-year longer-term refinancing operation was only settled on
1 March 2012.
Looking ahead, it is essential for banks to strengthen their resilience further, including by
retaining earnings. The soundness of banks' balance sheets will be a key factor in facilitating
both an appropriate provision of credit to the economy and the normalisation of all funding
channels.
To sum up, the economic analysis indicates that price developments should remain in line
with price stability over the medium term. A cross-check with the signals from the monetary
analysis confirms this picture.
It is of utmost importance to ensure fiscal sustainability and sustainable growth in the euro
area. Most euro area countries made good progress in terms of fiscal consolidation in
2011. While the necessary comprehensive fiscal adjustment is weighing on near-term
economic growth, its successful implementation will contribute to the sustainability of public
finances and thereby to the lowering of sovereign risk premia. In an environment of
enhanced confidence in fiscal balances, private sector activity should also be fostered,
supporting private investment and medium-term growth.
At the same time, together with fiscal consolidation, growth and growth potential in the euro
area need to be enhanced by decisive structural reforms. In this context, facilitating
entrepreneurial activities, the start-up of new firms and job creation is crucial. Policies aimed
at enhancing competition in product markets and increasing the wage and employment
adjustment capacity of firms will foster innovation, promote job creation and boost
longerterm growth prospects. Reforms in these areas are particularly important for countries which
have suffered significant losses in cost competitiveness and need to stimulate productivity
and improve trade performance.
In this context, let me make a few remarks on the adjustment process within the euro area.
As we know from the experience of other large currency areas, regional divergences in
economic developments are a normal feature. However, considerable imbalances have
accumulated in the last decade in several euro area countries and they are now in the
process of being corrected.
As concerns the monetary policy stance of the ECB, it has to be focused on the euro area.
Our primary objective remains to maintain price stability over the medium term. This is the
best contribution of monetary policy to fostering growth and job creation in the euro area.
Addressing divergences among individual euro area countries is the task of national
governments. They must undertake determined policy actions to address major imbalances
and vulnerabilities in the fiscal, financial and structural domains. We note that progress is
being made in many countries, but several governments need to be more ambitious.
Ensuring sound fiscal balances, financial stability and competitiveness in all euro area
countries is in our common interest.
We are now at your disposal for questions.