Mario Draghi: ECB press conference - introductory statement
Introductory statement by Mr Mario Draghi, President of the European Central Bank, and
Mr Victor Constancy, Vice-President of the European Central Bank, Valletta, 22 October 2015.
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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 Benicia for his kind hospitality and express our
special gratitude to his staff for the excellent organization of today's meeting of the Governing
Council. We will now report on the outcome of our meeting.
Based on our regular economic and monetary analyses, and in line with our forward guidance,
the Governing Council decided to keep the key ECB interest rates unchanged. As regards
non-standard monetary policy measures, the asset purchases are proceeding smoothly
and continue to have a favorable impact on the cost and availability of credit for firms and
households.
The Governing Council has been closely monitoring incoming information since our meeting
in early September. While euro area domestic demand remains resilient, concerns over growth
prospects in emerging markets and possible repercussions for the economy from
developments in financial and commodity markets continue to signal downside risks to the
outlook for growth and inflation. Most notably, the strength and persistence of the factors that
are currently slowing the return of inflation to levels below, but close to, 2% in the medium term
require thorough analysis. In this context, the degree of monetary policy accommodation will
need to be re-examined at our December monetary policy meeting, when the new Euro system
staff macroeconomic projections will be available. The Governing Council is willing and able
to act by using all the instruments available within its mandate if warranted in order to maintain
an appropriate degree of monetary accommodation. In particular, the Governing Council
recalls that the asset purchase programmer provides sufficient flexibility in terms of adjusting
its size, composition and duration. In the meantime, we will continue to fully implement the
monthly asset purchases of €60 billion. These purchases are intended to run until the end of
September 2016, or beyond, if necessary, and, in any case, until we see a sustained
adjustment in the path of inflation that is consistent with our aim of achieving inflation rates
below, but close to, 2% over the medium term.
Let me now explain our assessment of the available information in greater detail, starting with
the economic analysis. Euro area real GDP increased by 0.4%, quarter on quarter, in the
second quarter of 2015, following a rise of 0.5% in the previous quarter. The outcome for the
second quarter reflected positive contributions from both domestic demand and net exports.
The most recent survey indicators point to a broadly similar pace of real GDP growth in the
third quarter of the year. Overall, we expect the economic recovery to continue, albeit
dampened, in particular, by weaker than expected foreign demand. Domestic demand should
be further supported by our monetary policy measures and their favorable impact on financial
conditions, as well as by the progress made with fiscal consolidation and structural reforms.
Moreover, the decline in oil prices should provide support for households' real disposable
income and corporate profitability and, therefore, private consumption and investment.
However, the recovery in domestic demand in the euro area continues to be hampered by the
necessary balance sheet adjustments in a number of sectors and the sluggish pace of
implementation of structural reforms.
The risks to the euro area growth outlook remain on the downside, reflecting in particular the
heightened uncertainties regarding developments in emerging market economies, which have
the potential to further weigh on global growth and foreign demand for euro area exports.
Increased uncertainty has recently manifested itself in financial market developments, which
may have negative repercussions for euro area domestic demand.
According to Eurostat, euro area annual HICP inflation was -0.1% in September 2015, down
from 0.1% in August. Compared with the previous month, this mainly reflects a further decline
in energy price inflation. On the basis of the information available and current oil futures prices,
annual HICP inflation rates will remain very low in the near term. Annual HICP inflation is
expected to rise at the turn of the year, also on account of base effects associated with the fall
in oil prices in late 2014. Inflation rates are foreseen to pick up further during 2016 and 2017,
supported by the expected economic recovery, the pass-through of past declines in the euro
exchange rate and the assumption of somewhat higher oil prices in the years ahead as
currently reflected in oil futures markets. However, there are risks stemming from the economic
outlook and from financial and commodity market developments which could further slow down
the gradual increase in inflation rates towards levels closer to 2%. These risks are being closely
monitored by the Governing Council.
Turning to the monetary analysis, recent data confirm solid growth in broad money (M3),
notwithstanding a decline in the annual growth rate of M3 to 4.8% in August 2015 from 5.3%
in July. Annual growth in M3 continues to be mainly supported by its most liquid components,
with the narrow monetary aggregate M1 growing at an annual rate of 11.4% in August, after
12.2% in July.
Loan dynamics continued to improve. The annual rate of change of loans to non-financial
corporations (adjusted for loan sales and securitisation) increased to 0.4% in August, up from
0.3% in July, pursuing its gradual recovery since the beginning of 2014. Despite these
improvements, developments in loans to enterprises continue 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) increased to 1.0% in August 2015,
compared with 0.9% in July. The euro area bank lending survey for the third quarter of 2015
confirms the increase in demand for bank loans, supported by the general level of interest
rates, financing needs for investment purposes and housing market prospects. In addition,
credit standards eased further on loans to enterprises, notably due to increasing competitive
pressures in retail banking, while tightening somewhat on loans to households for house
purchase. Overall, the monetary policy measures we have put in place since June 2014
provide clear support for improvements both in borrowing conditions for firms and households
and in 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 indicates the need to firmly implement the Governing Council's
monetary policy decisions and to monitor closely all relevant incoming information as concerns
their impact on the medium-term outlook for price stability.
Monetary policy is focused on maintaining price stability over the medium term and its
accommodative stance supports economic activity. However, in order to reap the full benefits
from our monetary policy measures, other policy areas must contribute decisively. Given
continued high structural unemployment and low potential output growth in the euro area, the
ongoing cyclical recovery should be supported by effective structural policies. In particular,
actions to improve the business environment, including the provision of an adequate public
infrastructure, are vital to increase productive investment, boost job creation and raise
productivity. The swift and effective implementation of structural reforms, in an environment of
accommodative monetary policy, will not only lead to higher sustainable economic growth in
the euro area but will also raise expectations of permanently higher incomes and accelerate
the benefits of reforms, thereby making the euro area more resilient to global shocks. Fiscal
policies should support the economic recovery, while remaining in compliance with the EU's
fiscal rules. Full and consistent implementation of the Stability and Growth Pact is crucial for
confidence in our fiscal framework. At the same time, all countries should strive for a
growthfriendly composition of fiscal policies.
We are now at your disposal for questions.