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, 26 July 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.
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 non-standard monetary policy measures, we will continue to make net purchases
under the asset purchase programme (APP) at the current monthly pace of €30 billion until the
end of September 2018. We anticipate that, after September 2018, subject to incoming data
confirming our medium-term inflation outlook, we will reduce the monthly pace of the net asset
purchases to €15 billion until the end of December 2018 and then end net purchases. We intend
to reinvest the principal payments from maturing securities purchased under the APP for an
extended period of time after the end of our net asset purchases, and in any case for as long as
necessary to maintain favourable liquidity conditions and an ample degree of monetary
accommodation.
While uncertainties, notably related to the global trade environment, remain prominent, the
information available since our last monetary policy meeting indicates that the euro area
economy is proceeding along a solid and broad-based growth path. The underlying strength of
the economy confirms our confidence that the sustained convergence of inflation to our aim will
continue in the period ahead and will be maintained even after a gradual winding-down of our net
asset purchases. Nevertheless, 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. This support will continue to be provided by the net asset purchases until the end
of the year, by the sizeable stock of acquired assets and the associated reinvestments, and by
our enhanced forward guidance on the key ECB interest rates. 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.
Quarterly real GDP growth moderated to 0.4% in the first quarter of 2018, following growth of
0.7% in the previous three quarters. This easing reflects a pull-back from the very high levels of
growth in 2017 and is related mainly to weaker impetus from previously very strong external
trade, compounded by an increase in uncertainty and some temporary and supply-side factors at
both the domestic and the global level. The latest economic indicators and survey results have
stabilised and continue to point to ongoing solid and broad-based economic growth, in line with
the June 2018 Eurosystem staff macroeconomic projections for the euro area. Our monetary
policy measures, which have facilitated the deleveraging process, continue to underpin domestic
demand. Private consumption is supported by ongoing employment gains, which, in turn, partly
reflect past labour market reforms, and by growing household wealth. Business investment is
fostered by the favourable financing conditions, rising corporate profitability and solid demand.
Housing investment remains robust. In addition, the broad-based expansion in global demand is
expected to continue, thus providing impetus to euro area exports.
The risks surrounding the euro area growth outlook can still be assessed as broadly balanced.
Uncertainties related to global factors, notably the threat of protectionism, remain prominent.
Moreover, the risk of persistent heightened financial market volatility continues to warrant
monitoring.
Euro area annual HICP inflation increased to 2.0% in June 2018, from 1.9% in May, reflecting
mainly higher energy and food price inflation. On the basis of current futures prices for oil, annual
rates of headline inflation are likely to hover around the current level for the remainder of the year.
While measures of underlying inflation remain generally muted, they have been increasing from
earlier lows. Domestic cost pressures are strengthening and broadening amid high levels of
capacity utilisation and tightening labour markets. Uncertainty around the inflation outlook is
receding. Looking ahead, underlying inflation is expected to pick up towards the end of the year
and thereafter to increase gradually over the medium term, supported by our monetary policy
measures, the continuing economic expansion, the corresponding absorption of economic slack
and rising wage growth.
Turning to the monetary analysis, broad money (M3) growth increased to 4.4% in June 2018, up
from 4.0% in May. M3 growth continues to benefit from the impact of the ECB's monetary policy
measures and the low opportunity cost of holding the most liquid deposits. The narrow monetary
aggregate M1 remained the main contributor to broad money growth.
The recovery in the growth of loans to the private sector observed since the beginning of 2014 is
proceeding. The annual growth rate of loans to non-financial corporations rose to 4.1% in June
2018, after 3.7% in the previous month, while the annual growth rate of loans to households
remained unchanged at 2.9%. The euro area bank lending survey for the second quarter of 2018
indicates that loan growth continues to be supported by easing credit standards and increasing
demand across all loan categories.
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 ongoing broad-based expansion
calls for rebuilding fiscal buffers. This is particularly important in countries where government
debt remains high. All countries would benefit from intensifying efforts towards achieving a more
growth-friendly composition of public finances. A full, transparent and consistent implementation
of the Stability and Growth Pact and of the macroeconomic imbalance procedure over time and
across countries remains essential to increase the resilience of the euro area economy.
Improving the functioning of Economic and Monetary Union remains a priority. The Governing
Council urges specific and decisive steps to complete the banking union and the capital markets
union.
We are now at your disposal for questions.