Mr Duisenberg reports on the outcome of the latest meeting of the ECB Governing
Council
Introductory statement by the President of the European Central Bank, Dr W F Duisenberg at
the press conference held in Frankfurt on 6 May 1999.
Ladies and gentlemen, the Vice-President and I are here today to report on the outcome of
today's meeting of the Governing Council of the ECB.
The Governing Council reviewed, as usual, the main monetary, financial and other
in line with its monetary policy strategy. Following this discussion it
economic indicators
decided to keep the ECB's interest rates unchanged. The interest rate on the main refinancing
operations will thus remain 2.5%. In addition, the interest rate on the marginal lending facility
will continue to be 3.5% and that on the deposit facility will remain 1.5%. Let me give you
some details about our latest assessment of the monetary policy stance and thereby provide
for the decisions taken today.
explanations
Overall, monetary developments and our broadly based assessment of future price
developments do not signal dangers to price stability over the short and medium term.
monetary developments
With regard to in the euro area, in March 1999 the 12-month rate of
growth of M3 remained constant at 5.1%. While the pace of increase in overnight deposits
reduced further, signalling the waning influence of the uncertainties surrounding the launch of
the euro, deposits with an agreed maturity of up to two years grew at a stronger pace in March
than in February 1999. The latest figure for the three-month moving average of M3 growth,
covering the first quarter of 1999, was 5.2%. This was 0.2 percentage point higher than in the
previous three-month period, covering the period December 1998 to February 1999. The
Governing Council also noted that the annual rate of growth of total credit was broadly stable
at 7.5% in March 1999. In line with the assessment it had made on the occasion of its previous
meetings, the Governing Council took the view that recent monetary trends should not be seen
as a warning signal with regard to the future evolution of inflation. As we have emphasised in
the past, the monetary data in early 1999 may be affected by the special circumstances related
to the changeover to Stage Three of EMU. In addition, the three-month moving average of M3
growth remains relatively close to the reference value of 41⁄2%.
As regards financial indicators, I should like to stress that recent developments in bond yields
in the euro area were accompanied by some decoupling of yields from those in the United
States, as differentials between euro area long-term interest rates and comparable rates in the
United States have widened.
As regards the evolution of the world economy, recent developments tend to confirm the
picture of a mild overall improvement in the external environment beyond the euro area. As
before, however, the main features range from continuously strong growth of the US economy
to continuously weak output in Japan.
For the euro area, only a few additional data for economic indicators have become available,
and the assessment of forthcoming GDP developments is currently complicated by the fact
that the next release will be based on revised data in accordance with the new concept of the
Industrial production
European System of Accounts (ESA 95). declined at the beginning of
this year, and data on retail sales volumes suggest that the pace of growth slowed down
somewhat around the turn of the year, but recently there are preliminary indications of some
improvement. Recent developments in the labour market show a somewhat decelerating
employment growth towards the end of last year. The rate of unemployment remained
unchanged in March 1999, following two consecutive declines in January and February.
Industrial confidence declined further in the first quarter of 1999, but preliminary April
figures from the European Commission point to a slight improvement. Given the latest
developments up to April, it would appear that consumer confidence reached a peak at the
beginning of this year since when it has moderated slightly.
As expected, the trend towards decreasing inflation rates appears to have been reversed in
March. In March the annual rate of increase of consumer prices as measured by the
Harmonised Index of Consumer Prices (HICP) was 1.0%, compared with 0.8% in the
previous four months. This was essentially a consequence of the substantial rise in oil prices
which began in mid-February feeding through to energy prices in the HICP. In addition,
unprocessed food prices have continued to exert some upward pressure on overall price
increases in recent months. Excluding the more volatile HICP components of energy and
food, the rate of increase in consumer prices in March remained at 1.1% - i.e. unchanged from
the rate observed in February and marginally lower than that recorded at the turn of the year.
In at this point in time the general outlook for price stability remains favourable.
conclusion,
Although the lower effective exchange rate of the euro and the rise in oil prices may lead to
some upward pressure on headline HICP inflation in the coming months, the current
economic situation is likely to contribute to containing this upward pressure. At the same
time, current monetary developments and other available indicators do not point to
inflationary risks over the medium term. On the basis of this assessment the Governing
Council decided to keep the ECB's interest rates at their current levels.
In addition to reviewing the main monetary, financial and other economic indicators, the
Governing Council considered a report prepared by the ECB's Banking Supervision
Committee on "The effects of technology on the EU banking systems". The report assesses
the extent to which technological developments have taken place and are expected to occur in
the EU banking systems, the main categories of banking risks affected by these developments
and the strategic responses that EU banks are devising. The Governing Council agreed to
publish the report, which will be made available in due course.