Mario Draghi: ECB press conference - introductory statement
Introductory statement by Mr Mario Draghi, President of the European Central Bank, and Mr Luis
de Guindos, Vice-President of the European Central Bank, Frankfurt am Main, 24 October 2019.
* * *
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, and the incoming
President, Ms Lagarde.
Based on our regular economic and monetary analyses, we decided to keep the key ECB
interest rates unchanged. We expect them to remain at their present or lower levels until we
have seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2%
within our projection horizon, and such convergence has been consistently reflected in
underlying inflation dynamics.
As decided at our last meeting in September, we will restart net purchases under our asset
purchase programme (APP) at a monthly pace of €20 billion as from 1 November. We expect
them to run for as long as necessary to reinforce the accommodative impact of our policy rates,
and to end shortly before we start raising the key ECB interest rates.
We also intend to continue reinvesting, in full, the principal payments from maturing securities
purchased under the APP for an extended period of time past the date when we start raising the
key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity
conditions and an ample degree of monetary accommodation.
The Governing Council reiterated the need for a highly accommodative stance of monetary policy
for a prolonged period of time to support underlying inflation pressures and headline inflation
developments over the medium term. In particular, the Governing Council's forward guidance will
ensure that financial conditions adjust in accordance with changes to the inflation outlook. In any
case, the Governing Council continues to stand ready to adjust all of its instruments, as
appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its
commitment to symmetry.
The incoming data since the last Governing Council meeting in early September confirm our
previous assessment of a protracted weakness in euro area growth dynamics, the persistence
of prominent downside risks and muted inflation pressures. At the same time, ongoing
employment growth and increasing wages continue to underpin the resilience of the euro area
economy. The comprehensive package of policy measures that we decided at our last meeting
provides substantial monetary stimulus, which will contribute to a further easing in borrowing
conditions for firms and households. This will support the euro area expansion, the ongoing
buildup of domestic price pressures and, thus, the sustained convergence of inflation to our
mediumterm inflation aim.
Let me now explain our assessment in greater detail, starting with the Euro
economic analysis.
area real GDP growth was confirmed at 0.2%, quarter on quarter, in the second quarter of 2019,
following a rise of 0.4% in the previous quarter. Incoming economic data and survey information
continue to point to moderate but positive growth in the second half of this year. This slowdown in
growth mainly reflects the ongoing weakness of international trade in an environment of
persistent global uncertainties, which continue to weigh on the euro area manufacturing sector
and are dampening investment growth.
At the same time, the services and construction sectors remain resilient, despite some
moderation. The euro area expansion is supported by favourable financing conditions, further
employment gains in conjunction with rising wages, the mildly expansionary euro area fiscal
stance and the ongoing - albeit somewhat slower - growth in global activity.
The risks surrounding the euro area growth outlook remain on the downside. In particular, these
risks pertain to the prolonged presence of uncertainties, related to geopolitical factors, rising
protectionism and vulnerabilities in emerging markets.
Euro area annual HICP inflation decreased from 1.0% in August 2019 to 0.8% in September,
reflecting lower food and energy price inflation. On the basis of current futures prices for oil,
headline inflation is likely to decline slightly further before rising again at the end of the year.
Measures of underlying inflation remained generally muted and indicators of inflation expectations
stand at low levels. While labour cost pressures have strengthened amid tighter labour markets,
the weaker growth momentum is delaying their pass-through to inflation. Over the medium term
inflation is expected to increase, supported by our monetary policy measures, the ongoing
economic expansion and robust wage growth.
Turning to the broad money (M3) growth increased to 5.7% in August 2019,
monetary analysis,
after 5.1% in July. Sustained rates of broad money growth reflect ongoing bank credit creation for
the private sector and low opportunity costs of holding M3. The narrow monetary aggregate M1
continues to be the main contributor to broad money growth on the components side.
The growth of loans to firms and households remained solid, benefiting from the continued
passthrough of our accommodative monetary policy stance to bank lending rates. The annual growth
rate of loans to non-financial corporations increased to 4.3% in August, from 4.0% in July 2019,
while the annual growth rate of loans to households remained unchanged at 3.4% in August. The
euro area bank lending survey for the third quarter of 2019 indicates a slight easing of credit
standards and increasing demand for loans to households, while demand for loans to firms
remained broadly stable. Our accommodative monetary policy stance will help to safeguard
favourable bank lending conditions and will continue to support access to financing, in particular
for small and medium-sized enterprises.
To sum up, a cross-check of the outcome of the economic analysis with the signals coming
from the monetary analysis confirmed that an ample degree of monetary accommodation is still
necessary for the continued sustained convergence of inflation to levels that are below, but close
to, 2% over the medium term.
In order to reap the full benefits from our monetary policy measures, other policy areas must
contribute more decisively to raising the longer-term growth potential, supporting aggregate
demand at the current juncture and reducing vulnerabilities. The implementation of structural
policies in euro area countries needs to be substantially stepped up to boost euro area
productivity and growth potential, reduce structural unemployment and increase resilience. The
2019 country-specific recommendations should serve as the relevant signpost.
Regarding fiscal policies, the mildly expansionary euro area fiscal stance is currently providing
some support to economic activity. In view of the weakening economic outlook and the continued
prominence of downside risks, governments with fiscal space should act in an effective and
timely manner. In countries where public debt is high, governments need to pursue prudent
policies and meet structural balance targets, which will create the conditions for automatic
stabilisers to operate freely. All countries should intensify their efforts to achieve a more
growthfriendly composition of public finances.
Likewise, the transparent and consistent implementation of the European Union's fiscal and
economic governance framework over time and across countries remains essential to bolster
the resilience of the euro area economy. Improving the functioning of Economic and Monetary
Union remains a priority. The Governing Council welcomes the ongoing work and urges further
specific and decisive steps to complete the banking union and the capital markets union.
We are now at your disposal for questions.