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,
21 January 2016.
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Ladies and gentlemen, first of all let me wish you a Happy New Year. 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, and after the recalibration of our
monetary policy measures last month, we decided to keep the key ECB interest rates
unchanged and we expect them to remain at present or lower levels for an extended period of
time. Regarding our non-standard monetary policy measures, the asset purchases are
proceeding smoothly and continue to have a favourable impact on the cost and availability of
credit for firms and households.
Taking stock of the evidence available at the beginning of 2016, it is clear that the monetary
policy measures that we have adopted since mid-2014 are working. As a result, developments
in the real economy, credit provision and financing conditions have improved and have
strengthened the euro area's resilience to recent global economic shocks. The decisions taken
in early December to extend our monthly net asset purchases of €60 billion to at least the end
of March 2017, and to reinvest the principal payments on maturing securities for as long as
necessary, were fully appropriate. They will result in a significant addition of liquidity to the
banking system and will strengthen our forward guidance on interest rates.
Yet, as we start the new year, downside risks have increased again amid heightened
uncertainty about emerging market economies' growth prospects, volatility in financial and
commodity markets, and geopolitical risks. In this environment, euro area inflation dynamics
also continue to be weaker than expected. It will therefore be necessary to review and possibly
reconsider our monetary policy stance at our next meeting in early March, when the new staff
macroeconomic projections become available which will also cover the year 2018. In the
meantime, work will be carried out to ensure that all the technical conditions are in place to
make the full range of policy options available for implementation, if needed.
Let me now explain our assessment in greater detail, starting with the economic analysis.
Euro area real GDP growth was confirmed at 0.3%, quarter on quarter, in the third quarter of
2015, supported mainly by private consumption, while being dampened by a negative
contribution from net exports. The most recent survey indicators, available up to December,
point to ongoing real GDP growth momentum in the fourth quarter of last year. Looking ahead,
we expect the economic recovery to proceed. Domestic demand should be further supported
by our monetary policy measures and their favourable impact on financial conditions, as well
as by the earlier progress made with fiscal consolidation and structural reforms. Moreover, the
renewed fall in oil prices should provide additional support for households' real disposable
income and corporate profitability and, therefore, for private consumption and investment. In
addition, the fiscal stance in the euro area is becoming slightly expansionary, reflecting in
particular measures in support of refugees. However, the economic recovery in the euro area
continues to be dampened by subdued growth prospects in emerging markets, volatile
financial markets, the necessary balance sheet adjustments in a number of sectors and the
sluggish pace of implementation of structural reforms.
The risks to the euro area growth outlook remain on the downside and relate in particular to
the heightened uncertainties regarding developments in the global economy, as well as to
broader geopolitical risks. These risks have the potential to weigh on global growth and foreign
demand for euro area exports and on confidence more widely.
Euro area annual HICP inflation was 0.2% in December 2015, compared with 0.1% in
November. The December outcome was lower than expected, mainly reflecting the renewed
sharp decline in oil prices, as well as lower food price and services price inflation. On the basis
of current oil futures prices, which are well below the level observed a few weeks ago, the
expected path of annual HICP inflation in 2016 is now significantly lower compared with the
outlook in early December. Inflation rates are currently expected to remain at very low or
negative levels in the coming months and to pick up only later in 2016. Thereafter, supported
by our monetary policy measures and the expected economic recovery, inflation rates should
continue to recover, but risks of second-round effects should be monitored closely. A more
comprehensive picture of the impact of oil prices and other external and domestic factors on
the outlook for HICP inflation will become available in the March 2016 ECB staff
macroeconomic projections, which will also cover the year 2018.
Turning to the monetary analysis, recent data confirm solid growth in broad money (M3), with
the annual rate of growth of M3 standing at 5.1% in November 2015, after 5.3% in October.
Annual growth in M3 continues to be mainly supported by its most liquid components, with the
narrow monetary aggregate M1 growing at an annual rate of 11.2% in November, after 11.8%
in October.
Loan dynamics continued the path of gradual recovery observed since the beginning of 2014.
The annual rate of change of loans to non-financial corporations (adjusted for loan sales and
securitisation) increased to 0.9% in November 2015, up from 0.6% in October. Developments
in loans to enterprises 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
annual growth rate of loans to households (adjusted for loan sales and securitisation)
increased to 1.4% in November, compared with 1.2% in October.
The bank lending survey for the euro area for the fourth quarter of 2015 points to further
improvements in demand for bank loans, supported by the low level of interest rates, financing
needs for investment purposes and housing market prospects. Credit standards eased further
on loans to enterprises, notably owing to increasing competitive pressures in retail banking,
and reverted to a net easing on loans to households for house purchase. Overall, the monetary
policy measures in place since June 2014 have clearly improved borrowing conditions for both
firms and households, as well as 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 effectiveness of the monetary policy measures in
place and the need to review and possibly reconsider our monetary policy stance at our next
meeting in early March in order to secure a return of inflation rates towards levels below, but
close to, 2%.
Monetary policy is focused on maintaining price stability over the medium term and its
accommodative stance supports economic activity. However, in order to reap the full benefits
from our monetary policy measures, other policy areas must contribute decisively. Given
continued high structural unemployment and low potential output growth in the euro area, the
ongoing cyclical recovery should be supported by effective structural policies. In particular,
actions to improve the business environment, including the provision of an adequate public
infrastructure, are vital to increase productive investment, boost job creation and raise
productivity. The swift and effective implementation of structural reforms, in an environment of
accommodative monetary policy, will not only lead to higher sustainable economic growth in
the euro area but will also raise expectations of permanently higher incomes and accelerate
the beneficial effects of reforms, thereby making the euro area more resilient to global shocks.
Fiscal policies should support the economic recovery, while remaining in compliance with the
fiscal rules of the European Union. Full and consistent implementation of the Stability and
Growth Pact is crucial to maintain confidence in the fiscal framework. At the same time, all
countries should strive for a more growth-friendly composition of fiscal policies.
We are now at your disposal for questions.