Mario Draghi: ECB press conference - introductory statement
Introductory statement by Mr Mario Draghi, President of the European Central Bank, and
Mr Vítor Constâncio, Vice-President of the European Central Bank, Frankfurt am Main,
4 April 2013.
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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.
Based on our regular economic and monetary analyses, we decided to keep the key ECB
interest rates unchanged. HICP inflation rates have declined further, as anticipated, and
price developments over the medium term should remain contained. Monetary and loan
dynamics remain subdued. Inflation expectations for the euro area continue to be firmly
anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the
medium term. At the same time, weak economic activity has extended into the early part of
the year and a gradual recovery is projected for the second half of this year, subject to
downside risks. Against this overall background our monetary policy stance will remain
accommodative for as long as needed. In the coming weeks, we will monitor very closely all
incoming information on economic and monetary developments and assess any impact on
the outlook for price stability. It is essential for governments to intensify the implementation of
structural reforms at national level and to strengthen euro area governance, including the
implementation of the banking union. They should also build on progress made in fiscal
consolidation and proceed with financial sector restructuring.
We are also closely monitoring money market conditions and their potential impact on our
monetary policy stance and its transmission to the economy. As said on previous occasions,
we will continue with fixed rate tender procedures with full allotment for as long as necessary.
Let me now explain our assessment in greater detail, starting with the economic analysis.
The outcome for real GDP in the fourth quarter of 2012 was weak, with Eurostat's second
estimate indicating a contraction of 0.6% quarter on quarter. The decline was largely due to a
fall in domestic demand but also reflected a drop in exports. Recent data and indicators
confirm that the economic weakness extended into the early part of the year. Looking
forward, euro area export growth should benefit from a recovery in global demand and our
monetary policy stance should contribute to support domestic demand. Furthermore, the
improvements in financial markets seen since last summer should work their way through to
the real economy, notwithstanding recent uncertainties. Together, this should help stabilise
euro area economic activity and lead to a gradual recovery in the second part of the year. At
the same time, necessary balance sheet adjustments in the public and private sectors, and
the associated tight credit conditions, will continue to weigh on economic activity.
This economic outlook for the euro area remains subject to downside risks. The risks include
the possibility of even weaker than expected domestic demand and slow or insufficient
implementation of structural reforms in the euro area. These factors have the potential to
dampen the improvement in confidence and thereby delay the recovery.
According to Eurostat's flash estimate, euro area annual HICP inflation was 1.7% in March
2013, down from 1.8% in February. The ongoing decline in annual inflation rates mainly
reflects the energy component of the price index. Looking ahead, price developments over
the medium term should remain contained in an environment of weak economic activity in
the euro area. Inflation expectations are firmly anchored and in line with price stability over
the medium to long term.
Risks to the outlook for price developments continue to be broadly balanced over the
medium term, with upside risks relating to stronger than expected increases in administered
prices and indirect taxes, as well as higher oil prices, and downside risks stemming from
weaker economic activity.
Turning to the monetary analysis, the underlying pace of monetary expansion continues to
be subdued. The annual growth rate of M3 moderated to 3.1% in February, down from
3.5% in January. The annual growth rate of the narrow monetary aggregate, M1, increased
to 7.0% in February, from 6.6% in January. At the same time, MFI deposits in a number of
stressed countries strengthened further in February.
The annual growth rate of loans (adjusted for loan sales and securitisation) to non-financial
corporations and households remained broadly unchanged in February, at -1.4% and
0.4% respectively. To a large extent, subdued loan dynamics reflect the current stage of the
business cycle, heightened credit risk and the ongoing adjustment of financial and
non-financial sector balance sheets. At the same time, available information on non-financial
corporates' access to financing indicates tight credit conditions, particularly for small and
medium-sized enterprises in several euro area countries.
In order to ensure adequate transmission of monetary policy to the financing conditions in
euro area countries, it is essential that the fragmentation of euro area credit markets is
reduced further and the resilience of banks strengthened where needed. However,
considerable progress has been made since last summer in improving the funding situation
of banks, in strengthening the domestic deposit base in stressed countries and in reducing
reliance on the Eurosystem as reflected in repayments of the three-year LTROs. Further
decisive steps for establishing a banking union will help to accomplish this objective. In
particular, in the light of recent experience, we must emphasise that the future Single
Supervisory Mechanism and a Single Resolution Mechanism are crucial elements for moving
towards re-integrating the banking system and therefore require swift implementation.
To sum up, taking into account today's decision, the economic analysis indicates that price
developments should remain in line with price stability over the medium term. A cross-check
with the signals from the monetary analysis confirms this picture.
As regards fiscal policies, euro area countries should build on their efforts to reduce
government budget deficits and continue to implement thereby mutually
structural reforms,
reinforcing fiscal sustainability and economic growth. Fiscal policy strategies need to be
complemented by growth-enhancing structural reforms. Such reforms should be ambitious
and broad-ranging, encompassing product markets, including network industries, labour
markets and the modernisation of public administration. To support employment,
wagesetting should become more flexible and better aligned with productivity. These reforms will
help countries in their efforts to regain competitiveness, set the foundations for sustainable
growth and support the return of macroeconomic confidence.
We are now at your disposal for questions.