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, Paris, 2 October 2013.
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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 Noyer 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, 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. Incoming information and analysis have further underpinned our
previous assessment. Underlying price pressures in the euro area are expected to remain
subdued over the medium term. In keeping with this picture, monetary and, in particular,
credit dynamics remain subdued. Inflation expectations for the euro area continue to be
firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over
the medium term. At the same time, real GDP growth in the second quarter was positive,
after six quarters of negative output growth, and confidence indicators up to September
confirm the expected gradual improvement in economic activity from low levels. Our
monetary policy stance continues to be geared towards maintaining the degree of monetary
accommodation warranted by the outlook for price stability and promoting stable money
market conditions. It thereby provides support to a gradual recovery in economic activity.
Looking ahead, our monetary policy stance will remain accommodative for as long as
necessary, in line with the forward guidance provided in July. The Governing Council
confirms that it expects the key ECB interest rates to remain at present or lower levels for an
extended period of time. This expectation continues to be based on an unchanged overall
subdued outlook for inflation extending into the medium term, given the broad-based
weakness in the economy and subdued monetary dynamics. In the period ahead, we will
monitor all incoming information on economic and monetary developments and assess any
impact on the medium-term outlook for price stability. With regard to money market
conditions, we will remain particularly attentive to developments which may have implications
for the stance of monetary policy and are ready to consider all available instruments.
Let me now explain our assessment in greater detail, starting with the economic analysis.
Following six quarters of negative output growth, euro area real GDP rose, quarter on
quarter, by 0.3% in the second quarter of 2013, also supported by temporary factors related
to unusually adverse weather conditions in some euro area countries earlier this year.
Developments in industrial production data point to somewhat weaker growth at the
beginning of the third quarter, while survey-based confidence indicators up to September
have improved further from low levels, overall confirming our previous expectations of a
gradual recovery in economic activity. Looking ahead, output is expected to recover at a slow
pace, in particular owing to a gradual improvement in domestic demand supported by the
accommodative monetary policy stance. Euro area economic activity should, in addition,
benefit from a gradual strengthening of external demand for exports. Furthermore, the overall
improvements in financial markets seen since last summer appear to be gradually working
their way through to the real economy, as should the progress made in fiscal consolidation.
In addition, real incomes have benefited recently from generally lower inflation. This being
said, unemployment in the euro area remains high, and the necessary balance sheet
adjustments in the public and private sectors will continue to weigh on economic activity.
The risks surrounding the economic outlook for the euro area continue to be on the
downside. Developments in global money and financial market conditions and related
uncertainties may have the potential to negatively affect economic conditions. Other
downside risks include higher commodity prices in the context of renewed geopolitical
tensions, weaker than expected global demand and slow or insufficient implementation of
structural reforms in euro area countries.
According to Eurostat's flash estimate, and broadly in line with expectations, euro area
annual HICP inflation decreased in September 2013 to 1.1%, from 1.3% in August. On the
basis of current futures prices for energy, annual inflation rates are expected to remain at
such low levels in the coming months. Taking the appropriate medium-term perspective,
underlying price pressures are expected to remain subdued, reflecting the broad-based
weakness in aggregate demand and the modest pace of the recovery. Medium to long-term
inflation expectations continue to be firmly anchored in line with price stability.
The risks to the outlook for price developments are expected to be still broadly balanced over
the medium term, with upside risks relating in particular to higher commodity prices as well
as stronger than expected increases in administered prices and indirect taxes, and downside
risks stemming from weaker than expected economic activity.
Turning to the monetary analysis, data for August indicate that the underlying growth of
broad money (M3) and, in particular, credit remained subdued. Annual growth in M3
continued to be broadly stable at 2.3% in August, compared with 2.2% in July. Annual growth
in M1 remained strong but decreased to 6.8% in August, from 7.1% in July. Net capital
inflows into the euro area continued to be the main factor supporting annual M3 growth, while
the annual rate of change of loans to the private sector remained weak. The annual growth
rate of loans to households (adjusted for loan sales and securitisation) stood at 0.4% in
August, broadly unchanged since the turn of the year. The annual rate of change of loans to
non-financial corporations (adjusted for loan sales and securitisation) was -2.9% in August,
compared with -2.8% in July. Weak loan dynamics for non-financial corporations continue to
reflect primarily their lagged relationship with the business cycle, credit risk and the ongoing
adjustment of financial and non-financial sector balance sheets.
Since the summer of 2012 substantial progress has been made in improving the funding
situation of banks and, in particular, in strengthening the domestic deposit base in a number
of stressed countries. In order to ensure an adequate transmission of monetary policy to the
financing conditions in euro area countries, it is essential that the fragmentation of euro area
credit markets declines further and that the resilience of banks is strengthened where
needed. Further decisive steps to establish a banking union will help to accomplish this
objective.
To sum up, the economic analysis indicates that price developments should remain in line
with price stability over the medium term. A with the signals from the monetary
cross-check
analysis confirms this picture.
As regards fiscal policies, euro area countries should not unravel their efforts to reduce
deficits and put high government debt ratios on a downward path. The draft budgetary plans
that countries will now deliver for the first time under the "two-pack" regulations need to
provide for sufficiently far-reaching measures to achieve the fiscal targets for 2014.
Governments must also decisively strengthen efforts to implement the needed structural
reforms in product and labour markets. These reforms are required not only to help
countries to regain competitiveness and to rebalance within the euro area, but also to create
more flexible and dynamic economies that generate sustainable economic growth and
employment.
We are now at your disposal for questions.