European Central Bank: Press Conference - introductory statement
Introductory statement by Mr Willem F Duisenberg, President of the European Central Bank and
Mr Christian Noyer, Vice-President of the European Central Bank, at the Press Conference, held in
Frankfurt, on 2 November 2000.
* * *
Ladies and gentlemen, the Vice-President and I are here to report on the outcome of today's meeting
of the Governing Council of the ECB.
The Governing Council conducted its regular
examination of monetary and economic
developments and their implications for the maintenance of price stability in the euro area. It decided
to leave the minimum bid rate on the main refinancing operations of the Eurosystem unchanged at
4.75%. The interest rates on the marginal lending facility and the deposit facility were also kept
unchanged at 5.75% and 3.75% respectively.
Starting with the first pillar of the monetary policy strategy of the ECB, the
three-month average of
annual M3 growth stood at 5.4% in the period from June to September 2000, unchanged from the
three-month period ending in August 2000. While remaining above the reference value of 41⁄2%, M3
growth, reflecting the increases in ECB interest rates since November 1999, has shown signs of
moderation over recent months. A further factor to be taken into account is the fact that the growth rate
of credit to the private sector increased to 10.8% in September. However, this was influenced by the
financing of payments for UMTS licences. The growth rate of total MFI credit to euro area residents
remained broadly unchanged in that month.
Turning to the second pillar, one issue under consideration was the likely further development in
world economic activity and particularly real GDP growth in the euro area. Overall, the outlook for
growth of the world economy remains favourable. In particular, as far as the decline in real GDP
growth in the United States in the third quarter of 2000 is concerned, this may be seen as the first sign
of an orderly slowdown towards more sustainable levels, in line with the projections currently
available. More generally, the extended period of rising and high oil prices has increased the
uncertainty surrounding the sustainability of recent growth trends. However, by contrast with previous
periods of strong and prolonged increases in oil prices, the world economy is less dependent on oil
today and inflationary pressures are still being contained. This should help to avoid any sustained
negative effect on confidence, and thereby ensure that the impact of high oil prices on growth remains
moderate over the medium term.
Very much the same line of argument applies to the euro area. Euro area real GDP has been growing
at a high rate for four consecutive quarters, including the second quarter of 2000. Some monthly
indicators which extend into, or cover, the third quarter of this year point to a possible moderation in
growth rates. In particular, the pace of growth in industrial production appears to have declined
somewhat and some survey data have also indicated that there has been a certain degree of
moderation. However, survey data remain at high levels and should be underpinned further by positive
factors such as high employment growth. There is thus good reason to remain confident that strong
growth will be sustained in the euro area.
This picture is broadly supported by bond yields in the euro area. These have changed little over
recent weeks. They continue to be compatible with market expectations of strong economic growth in
the euro area in the medium term and with developments in consumer price inflation, which are in line
with the ECB's definition of price stability.
We trust that this assessment will also increasingly be reflected in These have clearly
exchange rates.
lost touch with economic fundamentals and this is posing risks to the world economy. For the euro
area in particular the continued undervaluation of the euro vis-à-vis other major currencies is putting
upward pressure on import prices. We shall, therefore, monitor exchange rate developments closely.
As regards developments in consumer prices, no additional euro area-wide data on the
Harmonised
Index of Consumer Prices (HICP) have become available since our last meeting. In September 2000
inflation rose to 2.8%, mainly as a result of higher energy prices. As I mentioned earlier, inflation rates
may remain above 2% for longer than was expected just a few months ago, owing to unexpected
developments in energy prices and the past decline in the euro.
In order to maintain price stability over the medium term it is important that economic agents
accurately perceive the nature of current price developments. In particular, it needs to be recognised
that current upward pressures can be successfully overcome if economic agents see them for what they
are - namely, one-off or temporary price increases resulting from external factors - and act
accordingly. These factors must not give rise to second-round effects. If oil prices do not rise further,
as the markets expect, the effects of past oil price increases will gradually drop out of the annual
inflation rate.
At the current juncture two main considerations should guide expectations regarding the outlook for
the euro area economy.
First, the Governing Council is committed to maintaining price stability in the medium term. It will
continue to assess thoroughly the outlook for price stability in the euro area. Monetary policy will not
accommodate inflationary tendencies in the euro area and in this way will make its best contribution to
sustainable growth.
Second, euro area countries are now in a much better position to withstand the adverse effects of a
sharp oil price increase than they were in the 1970s. The Governing Council remains optimistic with
regard to the economic outlook for the euro area. This positive outlook needs to be underpinned by
responsible fiscal policy-making and by social partners reacting appropriately to the increase in oil
prices. It is crucial that any loosening in fiscal policy be avoided. Similarly, continued wage
moderation is important in order both to contribute to further decreases in the level of unemployment
and to maintain a favourable outlook for price stability. It will be equally important for structural
reform to be intensified further in order to allow current high growth rates of real GDP and
employment to be sustained into 2001 and beyond, without generating inflationary pressure.
Let me now give the floor to the Vice-President to inform you about two further issues decided by
the Governing Council today.
I should like to inform you that, in the course of next week, the ECB will release an update of the
so-called Balance of Payments Book. This annual publication documents the statistical
methodologies applied in EU Member States for the compilation of balance of payments statistics and,
as such, improves the transparency of the compilation of euro area statistics. In addition to updated
individual country chapters, this version includes two new chapters on the compilation and
methodological standards for the euro area balance of payments and international investment position.
The Book will be published on the ECB's website and hard copies will be available at the ECB.
The Governing Council has today also adopted an ECB Regulation establishing transitional
provisions for the integration of Greek credit institutions into the Eurosystem's minimum reserve
system, as a consequence of the introduction of the euro in Greece as from 1 January 2001.