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, 13 September
2018.
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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.
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 their present levels at least
through the summer of 2019, and in any case for as long as necessary to ensure the continued
sustained convergence of inflation to levels that are below, but close to, 2% over the medium
term.
Regarding we will continue to make net purchases
non-standard monetary policy measures,
under the asset purchase programme (APP) at the current monthly pace of €30 billion until the
end of this month. After September 2018, we will reduce the monthly pace of the net asset
purchases to €15 billion until the end of December 2018 and we anticipate that, subject to
incoming data confirming our medium-term inflation outlook, we will then end net purchases. We
intend to reinvest the principal payments from maturing securities purchased under the APP for
an extended period of time after the end of our net asset purchases, and in any case for as long
as necessary to maintain favourable liquidity conditions and an ample degree of monetary
accommodation.
The incoming information, including our new September 2018 staff projections, broadly confirms
our previous assessment of an ongoing broad-based expansion of the euro area economy and
gradually rising inflation. The underlying strength of the economy continues to support our
confidence that the sustained convergence of inflation to our aim will proceed and will be
maintained even after a gradual winding-down of our net asset purchases. At the same time,
uncertainties relating to rising protectionism, vulnerabilities in emerging markets and financial
market volatility have gained more prominence recently. Significant monetary policy stimulus is
still needed to support the further build-up of domestic price pressures and headline inflation
developments over the medium term. This support will continue to be provided by the net asset
purchases until the end of the year, by the sizeable stock of acquired assets and the associated
reinvestments, and by our enhanced forward guidance on the key ECB interest rates. In any
event, the Governing Council stands ready to adjust all of its instruments as appropriate to
ensure that inflation continues to move towards the Governing Council's inflation aim in a
sustained manner.
Let me now explain our assessment in greater detail, starting with the Euro
economic analysis.
area real GDP increased by 0.4%, quarter on quarter, in the second quarter of 2018, following
growth at the same rate in the previous quarter. Despite some moderation following the strong
growth performance in 2017, the latest economic indicators and survey results overall confirm
ongoing broad-based growth of the euro area economy. Our monetary policy measures continue
to underpin domestic demand. Private consumption is supported by ongoing employment gains,
which, in turn, partly reflect past labour market reforms, and by rising wages. Business
investment is fostered by the favourable financing conditions, rising corporate profitability and
solid demand. Housing investment remains robust. In addition, the expansion in global activity is
expected to continue, supporting euro area exports.
This assessment is broadly reflected in the September 2018 ECB staff macroeconomic
projections for the euro area. These projections foresee annual real GDP increasing by 2.0% in
2018, 1.8% in 2019 and 1.7% in 2020. Compared with the June 2018 Eurosystem staff
macroeconomic projections, the outlook for real GDP growth has been revised down slightly for
2018 and 2019, mainly due to a somewhat weaker contribution from foreign demand.
The risks surrounding the euro area growth outlook can still be assessed as broadly balanced. At
the same time, risks relating to rising protectionism, vulnerabilities in emerging markets and
financial market volatility have gained more prominence recently.
According to Eurostat's flash estimate, euro area annual HICP inflation was 2.0% in August 2018,
down from 2.1% in July. On the basis of current futures prices for oil, annual rates of headline
inflation are likely to hover around the current level for the remainder of the year. While measures
of underlying inflation remain generally muted, they have been increasing from earlier lows.
Domestic cost pressures are strengthening and broadening amid high levels of capacity
utilisation and tightening labour markets, which is pushing up wage growth. Uncertainty around
the inflation outlook is receding. Looking ahead, underlying inflation is expected to pick up
towards the end of the year and thereafter to increase gradually over the medium term,
supported by our monetary policy measures, the continuing economic expansion and rising
wage growth.
This assessment is also broadly reflected in the September 2018 ECB staff macroeconomic
projections for the euro area, which foresee annual HICP inflation at 1.7% in 2018, 2019 and
2020, which is unchanged from the June 2018 Eurosystem staff macroeconomic projections.
Turning to the monetary analysis, broad money (M3) growth declined to 4.0% in July 2018, from
4.5% in June. Apart from some volatility in monthly flows, M3 growth is increasingly supported by
bank credit creation. The narrow monetary aggregate M1 remained the main contributor to broad
money growth.
The recovery in the growth of loans to the private sector observed since the beginning of 2014 is
proceeding. The annual growth rate of loans to non-financial corporations stood at 4.1% in July
2018, while the annual growth rate of loans to households stood at 3.0%, both unchanged from
June.
The pass-through of the monetary policy measures put in place since June 2014 continues to
significantly support borrowing conditions for firms and households, access to financing - in
particular for small and medium-sized enterprises - and 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 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 and reducing vulnerabilities.
The implementation of in euro area countries needs to be substantially
structural reforms
stepped up to increase resilience, reduce structural unemployment and boost euro area
productivity and growth potential. Regarding fiscal policies, the broad-based expansion calls for
rebuilding fiscal buffers. This is particularly important in countries where government debt is high
and for which full adherence to the Stability and Growth Pact is critical for safeguarding sound
fiscal positions. Likewise, the transparent and consistent implementation of the EU'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 urges specific and decisive steps to complete
the banking union and the capital markets union.
We are now at your disposal for questions.