Mario Draghi: ECB press conference - introductory statement
Introductory statement by Mr Mario Draghi, President of the European Central Bank,
Frankfurt am Main, 4 December 2014.
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Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to the first
press conference in our new premises. 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, and in line with our forward
guidance, we decided to keep the key ECB interest rates unchanged. As regards our
nonstandard monetary policy measures, we have started purchasing covered bonds and
asset-backed securities. These purchase programmes will last for at least two years. Next
week, we will conduct the second targeted longer-term refinancing operation, to be followed
by six further operations until June 2016. Taken together, our measures will have a sizeable
impact on our balance sheet, which is intended to move towards the dimensions it had at the
beginning of 2012.
In the coming months, our measures will further ease the monetary policy stance more
broadly, support our forward guidance on the key ECB interest rates and reinforce the fact
that there are significant and increasing differences in the monetary policy cycle between
major advanced economies. However, the latest euro area macroeconomic projections
indicate lower inflation, accompanied by weaker real GDP growth and subdued monetary
dynamics.
In this context, early next year the Governing Council will reassess the monetary stimulus
achieved, the expansion of the balance sheet and the outlook for price developments. We
will also evaluate the broader impact of recent oil price developments on medium-term
inflation trends in the euro area. Should it become necessary to further address risks of too
prolonged a period of low inflation, the Governing Council remains unanimous in its
commitment to using additional unconventional instruments within its mandate. This would
imply altering early next year the size, pace and composition of our measures. In response to
the request of the Governing Council, ECB staff and the relevant Eurosystem committees
have stepped up the technical preparations for further measures, which could, if needed, be
implemented in a timely manner. All of our monetary policy measures are geared towards
underpinning the firm anchoring of medium to long-term inflation expectations, in line with our
aim of achieving inflation rates below, but close to, 2%, and contribute to a return of inflation
rates towards that level.
Let me now explain our assessment in greater detail, starting with the economic analysis.
Real GDP in the euro area rose by 0.2%, quarter on quarter, in the third quarter of this year.
This was in line with earlier indications of a weakening in the euro area's growth momentum,
leading to a downward revision of the outlook for euro area real GDP growth in the most
recent forecasts. The latest data and survey evidence up to November confirm this picture of
a weaker growth profile in the period ahead. At the same time, the outlook for a modest
economic recovery remains in place. On the one hand, domestic demand should be
supported by our monetary policy measures, the ongoing improvements in financial
conditions, the progress made in fiscal consolidation and structural reforms, and significantly
lower energy prices supporting real disposable income. Furthermore, demand for exports
should benefit from the global recovery. On the other hand, the recovery is likely to continue
to be dampened by high unemployment, sizeable unutilised capacity, and the necessary
balance sheet adjustments in the public and private sectors.
These elements are reflected in the December 2014 Eurosystem staff macroeconomic
projections for the euro area, which foresee annual real GDP increasing by 0.8% in 2014,
1.0% in 2015 and 1.5% in 2016. Compared with the September 2014 ECB staff
macroeconomic projections, the projections for real GDP growth have been revised
substantially downwards. Downward revisions were made to the projections for both
domestic demand and net exports.
The risks surrounding the economic outlook for the euro area are on the downside. In
particular, the weak euro area growth momentum, alongside high geopolitical risks, has the
potential to dampen confidence and especially private investment. In addition, insufficient
progress in structural reforms in euro area countries constitutes a key downward risk to the
economic outlook.
According to Eurostat's flash estimate, euro area annual HICP inflation was 0.3% in
November 2014, after 0.4% in October. Compared with the previous month, this mainly
reflects a stronger fall in energy price inflation and a somewhat lower annual increase in
services prices. Taking into account the current environment of very low rates of inflation, it
will be important to assess the broader impact of recent oil price developments on
mediumterm inflation trends and to avoid spillovers to inflation expectations and wage formation.
Against the background of recent oil price developments, it is crucial to recall that forecasts
and projections are based on technical assumptions, especially for oil prices and exchange
rates. On the basis of information available in mid-November, at the time the December 2014
Eurosystem staff macroeconomic projections for the euro area were finalised, annual HICP
inflation was foreseen to reach 0.5% in 2014, 0.7% in 2015 and 1.3% in 2016. In comparison
with the September 2014 ECB staff macroeconomic projections, they have been revised
significantly downwards. These revisions reflect mainly lower oil prices in euro terms and the
impact of the downwardly revised outlook for growth, but they do not yet incorporate the fall
in oil prices over the past few weeks following the cut-off date for the projections. Over the
coming months, annual HICP inflation rates could experience renewed downward
movements, given the recent further decline in oil prices.
The Governing Council will continue to closely monitor the risks to the outlook for price
developments over the medium term. In this context, we will focus in particular on the
possible repercussions of dampened growth dynamics, geopolitical developments, exchange
rate and energy price developments, and the pass-through of our monetary policy measures.
We will be particularly vigilant as regards the broader impact of recent oil price developments
on medium-term inflation trends in the euro area.
Turning to the monetary analysis, data for October 2014 support the assessment of
subdued underlying growth in broad money (M3), with the annual growth rate standing at
2.5% in October, unchanged from September. Annual growth in M3 continues to be
supported by its most liquid components, with the narrow monetary aggregate M1 growing at
an annual rate of 6.2% in October.
The annual rate of change of loans to non-financial corporations (adjusted for loan sales and
securitisation) was -1.6% in October, after -1.8% in September, showing a gradual recovery
from a trough of -3.2% in February. On average over recent months, net redemptions have
moderated from the historically high levels recorded a year ago. Lending to non-financial
corporations continues to reflect the lagged relationship with the business cycle, credit risk,
credit supply factors 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) was 0.6% in October, after 0.5% in September. The monetary policy
measures in place and the completion of the ECB's comprehensive assessment should
support a further stabilisation of credit flows.
To sum up, a cross-check of the outcome of the economic analysis with the signals coming
from the monetary analysis confirms the need to closely monitor the risks to the outlook for
price developments over the medium term and to be prepared to provide further monetary
policy accommodation, if needed.
Monetary policy is focused on maintaining price stability over the medium term and its
accommodative stance contributes to supporting economic activity. However, in order to
strengthen investment activity, boost job creation and raise productivity growth, other policy
areas need to contribute decisively. In particular, the determined implementation of product
and labour market reforms as well as actions to improve the business environment for
firms need to gain momentum in several countries. It is crucial that structural reforms be
implemented credibly and effectively as this will raise expectations of higher incomes and
encourage firms to increase investment today and bring forward the economic recovery.
Fiscal policies should support the economic recovery, while ensuring debt sustainability in
compliance with the Stability and Growth Pact, which remains the anchor for confidence. All
countries should use the available scope for a more growth-friendly composition of fiscal
policies. The Investment Plan for Europe which the European Commission announced on
26 November 2014 will also support the recovery.
We are now at your disposal for questions.