Mario Draghi: ECB press conference - introductory statement
Introductory statement by Mr Mario Draghi, President of the European Central Bank, and Mr Luis
de Guindos, Vice-President of the European Central Bank, Frankfurt am Main, 13 December
2018.
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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,
which was also attended by the President of the Eurogroup, Mr Centeno.
Based on our regular economic and monetary analyses, we decided to keep the key ECB
interest rates unchanged. We continue to expect them to remain at their present levels at least
through the summer of 2019, and in any case for as long as necessary to ensure the continued
sustained convergence of inflation to levels that are below, but close to, 2% over the medium
term.
Regarding our net purchases under the asset
non-standard monetary policy measures,
purchase programme (APP) will end in December 2018. At the same time, we are enhancing our
forward guidance on reinvestment. Accordingly, we intend to continue reinvesting, in full, the
principal payments from maturing securities purchased under the APP for an extended period of
time past the date when we start raising the key ECB interest rates, and in any case for as long
as necessary to maintain favourable liquidity conditions and an ample degree of monetary
accommodation.
While incoming information has been weaker than expected, reflecting softer external demand
but also some country and sector-specific factors, the underlying strength of domestic demand
continues to underpin the euro area expansion and gradually rising inflation pressures. This
supports our confidence that the sustained convergence of inflation to our aim will proceed and
will be maintained even after the end of our net asset purchases. At the same time, uncertainties
related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and
financial market volatility remain prominent. Significant monetary policy stimulus is still needed to
support the further build-up of domestic price pressures and headline inflation developments over
the medium term. Our forward guidance on the key ECB interest rates, reinforced by the
reinvestments of the sizeable stock of acquired assets, continues to provide the necessary
degree of monetary accommodation for the sustained convergence of inflation to our aim. In any
event, the Governing Council stands ready to adjust all of its instruments, as appropriate, to
ensure that inflation continues to move towards the Governing Council's inflation aim in a
sustained manner.
Let me now explain our assessment in greater detail, starting with the economic analysis. Euro
area real GDP increased by 0.2%, quarter on quarter, in the third quarter of 2018, following
growth of 0.4% in the previous two quarters. The latest data and survey results have been
weaker than expected, reflecting a diminishing contribution from external demand and some
country and sector-specific factors. While some of these factors are likely to unwind, this may
suggest some slower growth momentum ahead. At the same time, domestic demand, also
backed by our accommodative monetary policy stance, continues to underpin the economic
expansion in the euro area. The strength of the labour market, as reflected in ongoing
employment gains and rising wages, still supports private consumption. Moreover, business
investment is benefiting from domestic demand, favourable financing conditions and improving
balance sheets. Residential investment remains robust. In addition, the expansion in global
activity is still expected to continue, supporting euro area exports, although at a slower pace.
This assessment is broadly reflected in the December 2018 Eurosystem staff macroeconomic
projections for the euro area. These projections foresee annual real GDP increasing by 1.9% in
2018, 1.7% in 2019, 1.7% in 2020 and 1.5% in 2021. Compared with the September 2018 ECB
staff macroeconomic projections, the outlook for real GDP growth has been revised slightly down
in 2018 and 2019.
The risks surrounding the euro area growth outlook can still be assessed as broadly balanced.
However, the balance of risks is moving to the downside owing to the persistence of
uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging
markets and financial market volatility.
According to Eurostat's flash estimate, euro area annual HICP inflation declined to 2.0% in
November 2018, from 2.2% in October, reflecting mainly a decline in energy inflation. On the
basis of current futures prices for oil, headline inflation is likely to decrease over the coming
months. Measures of underlying inflation remain generally muted, but domestic cost pressures
are continuing to strengthen and broaden amid high levels of capacity utilisation and tightening
labour markets, which is pushing up wage growth. Looking ahead, underlying inflation is
expected to increase over the medium term, supported by our monetary policy measures, the
ongoing economic expansion and rising wage growth.
This assessment is also broadly reflected in the December 2018 Eurosystem staff
macroeconomic projections for the euro area, which foresee annual HICP inflation at 1.8% in
2018, 1.6% in 2019, 1.7% in 2020 and 1.8% in 2021. Compared with the September 2018 ECB
staff macroeconomic projections, the outlook for HICP inflation has been revised slightly up for
2018 and down for 2019.
Turning to the monetary analysis, broad money (M3) growth stood at 3.9% in October 2018,
after 3.6% in September. Apart from some volatility in monthly flows, M3 growth continues to be
supported by bank credit creation. The narrow monetary aggregate M1 remained the main
contributor to broad money growth.
In line with the upward trend observed since the beginning of 2014, the growth of loans to the
private sector continues to support the economic expansion. The annual growth rate of loans to
non-financial corporations stood at 3.9% in October 2018, after 4.3% in September, while the
annual growth rate of loans to households remained unchanged at 3.2%. The pass-through of
the monetary policy measures put in place since June 2014 continues to significantly support
borrowing conditions for firms and households, access to financing - in particular for small and
medium-sized enterprises - and 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 confirmed that an ample degree of monetary accommodation is still
necessary for the continued sustained convergence of inflation to levels that are below, but close
to, 2% over the medium term.
In order to reap the full benefits from our monetary policy measures, other policy areas must
contribute more decisively to raising the longer-term growth potential and reducing vulnerabilities.
The implementation of structural reforms in euro area countries needs to be substantially
stepped up to increase resilience, reduce structural unemployment and boost euro area
productivity and growth potential. Regarding fiscal policies, the Governing Council reiterates the
need for rebuilding fiscal buffers. This is particularly important in countries where government
debt is high and for which full adherence to the Stability and Growth Pact is critical for
safeguarding sound fiscal positions. Likewise, the transparent and consistent implementation of
the EU's fiscal and economic governance framework over time and across countries remains
essential to bolster the resilience of the euro area economy. Improving the functioning of
Economic and Monetary Union remains a priority. The Governing Council welcomes the ongoing
work and urges further specific and decisive steps to complete the banking union and the capital
markets union.
Further information on the technical parameters of the reinvestments will be released at 15:30
CET on the ECB's website.
We are now at your disposal for questions.