Mario Draghi: ECB press conference - introductory statement
Introductory statement by Mr Mario Draghi, President of the European Central Bank, Naples,
2 October 2014.
* * *
Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our
press conference. I would like to thank Governor Visco 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 our meeting.
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. Following up on the
decisions of 4 September 2014, we also decided on the key operational details of both the
asset-backed securities purchase programme and the new covered bond purchase
programme.
This will allow us to start purchasing covered bonds and asset-backed securities (ABSs) in
the fourth quarter of 2014, starting with covered bonds in the second half of October. The
programmes will last for at least two years. Together with the series of targeted longer-term
refinancing operations to be conducted until June 2016, these purchases will have a sizeable
impact on our balance sheet.
The new measures will support specific market segments that play a key role in the financing
of the economy. They will thereby further enhance the functioning of the monetary policy
transmission mechanism, facilitate credit provision to the broad economy and generate
positive spillovers to other markets. Taking into account the overall subdued outlook for
inflation, the weakening in the euro area's growth momentum over the recent past and the
continued subdued monetary and credit dynamics, our asset purchases should ease the
monetary policy stance more broadly. They should also strengthen 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.
Together with the monetary accommodation already in place, the determined implementation
of the new measures will underpin the firm anchoring of medium to long-term inflation
expectations, in line with our aim of maintaining inflation rates below, but close to, 2%. As all
our measures work their way through to the economy they will contribute to a return of
inflation rates to levels closer to our aim. Should it become necessary to further address risks
of too prolonged a period of low inflation, the Governing Council is unanimous in its
commitment to using additional unconventional instruments within its mandate.
A separate press release will provide further information on the modalities of our new
purchase programmes for ABSs and covered bonds. It will be released at 3.30 p.m.
Let me now explain our assessment in greater detail, starting with the economic analysis.
Following four quarters of moderate expansion, euro area real GDP remained unchanged
between the first and second quarter of this year. Survey data available up to September
confirm the weakening in the euro area's growth momentum, while remaining consistent with
a modest economic expansion in the second half of the year. Looking ahead to 2015, the
outlook for a moderate recovery in the euro area remains in place, but the main factors and
assumptions shaping this assessment need to be monitored closely. 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
lower energy prices supporting real disposable income. Furthermore, demand for exports
should benefit from the global recovery. At the same time, the recovery is likely to continue to
be dampened by high unemployment, sizeable unutilised capacity, continued negative bank
loan growth to the private sector, and the necessary balance sheet adjustments in the public
and private sectors.
The risks surrounding the economic outlook for the euro area remain on the downside. In
particular, the recent weakening in the euro area's growth momentum, alongside heightened
geopolitical risks, could dampen confidence and, in particular, 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
September 2014, after 0.4% in August. Compared with the previous month, this reflects a
stronger decline in energy prices and somewhat lower price increases in most other
components of the HICP. On the basis of current information, annual HICP inflation is
expected to remain at low levels over the coming months, before increasing gradually during
2015 and 2016.
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 developments and the pass-through of our monetary policy measures.
Turning to the monetary analysis, data for August 2014 continue to point to subdued
underlying growth in broad money (M3), with the annual growth rate increasing moderately to
2.0% in August, after 1.8% in July. 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 5.8% in August.
The annual rate of change of loans to non-financial corporations (adjusted for loan sales and
securitisation) remained negative at -2.0% in August, after -2.2% in the previous month. 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 0.5% in August, broadly
unchanged since the beginning of 2013.
Against the background of weak credit growth, the ECB is now close to finalising the
comprehensive assessment of banks' balance sheets, which is of key importance to
overcome credit supply constraints.
To sum up, a cross-check of the outcome of the economic analysis with the signals coming
from the monetary analysis confirms the recent decisions taken by the Governing Council to
provide further monetary policy accommodation and to support lending to the real economy.
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, job creation and potential growth, other policy areas need to
contribute decisively. In particular, the legislation and implementation of structural reforms
clearly need to gain momentum in several countries. This applies to product and labour
markets as well as to actions to improve the business environment for firms. As regards
fiscal policies, euro area countries should not unravel the progress already made and should
proceed in line with the rules of the Stability and Growth Pact. This should be reflected in the
draft budgetary plans for 2015 that governments will now deliver, in which they will address
the relevant country-specific recommendations. The Pact should remain the anchor for
confidence in sustainable public finances, and the existing flexibility within the rules should
allow governments to address the budgetary costs of major structural reforms, to support
demand and to achieve a more growth-friendly composition of fiscal policies. A full and
consistent implementation of the euro area's existing fiscal and macroeconomic surveillance
framework is key to bringing down high public debt ratios, to raising potential growth and to
increasing the euro area's resilience to shocks.
We are now at your disposal for questions.