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,
2 June 2016.
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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 Nowotny 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 our meeting.
Based on our regular economic and monetary analyses, we decided to keep the key ECB
interest rates unchanged. We continue to expect them to remain at present or lower levels
for an extended period of time, and well past the horizon of our net asset purchases.
Regarding non-standard monetary policy measures, we confirm that the monthly asset
purchases of €80 billion are intended to run until the end of March 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. As a next step, on 8 June we will start
making purchases under our corporate sector purchase programme (CSPP). Moreover,
starting on 22 June, we will conduct the first operation in our new series of targeted
longerterm refinancing operations. Further information on implementation aspects of the
CSPP will be released after the press conference on the ECB's website.
The comprehensive package of decisions taken in early March underpins the momentum of
the euro area's economic recovery and fosters the return of inflation to levels below, but
close to, 2%. In particular, our measures continue to ease the cost of credit and contribute to
a strengthening in credit creation. The economic recovery is gradually proceeding. Additional
stimulus, beyond the impetus already taken into account, is expected from the monetary
policy measures still to be implemented and will contribute to further rebalancing the risks to
the outlook for growth and inflation. In the current context, it is crucial to ensure that the very
low inflation environment does not become entrenched in second-round effects on wage and
price setting. 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.
Euro area real GDP increased by 0.5%, quarter on quarter, in the first quarter of 2016, after
0.3% in the last quarter of 2015. Growth continues to be supported by domestic demand,
while being dampened by weak exports. The latest data point to ongoing growth in the
second quarter, though possibly at a lower rate than in the first quarter. Looking ahead, we
expect the economic recovery to proceed at a moderate but steady pace. Domestic demand
remains supported by the pass-through of our monetary policy measures to the real
economy. Favourable financing conditions and improvements in corporate profitability
continue to promote investment. Moreover, sustained employment gains, which are also
benefiting from past structural reforms, and still relatively low oil prices provide additional
support for households' real disposable income and private consumption. In addition, the
fiscal stance in the euro area is slightly expansionary. However, the economic recovery in the
euro area continues to be dampened by subdued growth prospects in emerging markets, the
necessary balance sheet adjustments in a number of sectors and a sluggish pace of
implementation of structural reforms.
This outlook is broadly reflected in the June 2016 Eurosystem staff macroeconomic
projections for the euro area, which foresee annual real GDP increasing by 1.6% in 2016 and
1.7% in 2017 and 2018. Compared with the March 2016 ECB staff macroeconomic
projections, the outlook for real GDP growth has been revised up for 2016 and has remained
broadly unchanged for 2017 and 2018.
The risks to the euro area growth outlook remain tilted to the downside, but the balance of
risks has improved on the back of the monetary policy measures taken and the stimulus still
in the pipeline. Downside risks continue to relate to developments in the global economy, to
the upcoming British referendum and to other geopolitical risks.
According to Eurostat's flash estimate, euro area annual HICP inflation in May 2016 was
-0.1%, up from -0.2% in April, mainly reflecting higher energy and services price
inflation. Looking ahead, on the basis of current futures prices for oil, inflation rates are likely
to remain very low or negative in the next few months before picking up in the second half of
2016, in large part owing to base effects in the annual rate of change of energy prices.
Supported by our monetary policy measures and the expected economic recovery, inflation
rates should recover further in 2017 and 2018.
This broad pattern is also reflected in the June 2016 Eurosystem staff macroeconomic
projections for the euro area, which foresee annual HICP inflation at 0.2% in 2016, 1.3% in
2017 and 1.6% in 2018. In comparison with the March 2016 ECB staff macroeconomic
projections, the outlook for HICP inflation has been revised slightly up for 2016, reflecting
recent oil price increases, and has remained unchanged for 2017 and 2018.
Turning to the monetary analysis, broad money (M3) continued to grow at a robust pace in
April 2016, with its annual rate of growth standing at 4.6%, after 5.0% in March. As in
previous months, annual growth in M3 is mainly supported by its most liquid components,
with the narrow monetary aggregate M1 growing at an annual rate of 9.7% in April, after
10.1% in March.
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 (adjusted for loan sales and
securitisation) stood at 1.2% in April 2016, compared with 1.1% in March. 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)
remained broadly stable at 1.5% in April, after 1.6% in March.
The monetary policy measures in place since June 2014 have clearly improved borrowing
conditions for firms and households, as well as credit flows across the euro area. The
comprehensive package of new monetary policy measures adopted in March this year
underpins the ongoing upturn in loan growth, thereby supporting the recovery of the real
economy.
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 preserve an appropriate degree of
monetary accommodation 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, and as again strongly echoed in both European and international policy
discussions, 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 levels.
Structural policies are essential, given continued high structural unemployment and low
potential output growth in the euro area. Structural reforms are necessary in all euro area
countries, although specific reform needs differ across the individual economies. At this
stage, 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, including the extension of the Juncker plan, and progress on the capital markets
union will also contribute positively to this objective. In an environment of accommodative
monetary policy, the swift and effective implementation of structural reforms, in line with the
country-specific recommendations recently published by the European Commission, will not
only lead to higher sustainable economic growth in the euro area but will also make the euro
area more resilient to global shocks. Fiscal policies should also 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 over time and across countries 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.