mario draghi : ecb press conference – introductory statement introductory statement by mr mario draghi, president of the european central bank, and mr vitor constancio, vice - president of the european central bank, frankfurt am main, 8 march 2012. * * * 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. the information that has become available since the beginning of february has confirmed our previous assessment of the outlook for economic activity. available survey indicators confirm signs of a stabilisation in the euro area economy. however, the economic outlook is still subject to downside risks. owing to rises in energy prices and indirect taxes, inflation rates are now likely to stay above 2 % in 2012, with upside risks prevailing. nevertheless, we expect price developments to remain in line with price stability over the policy - relevant horizon. the underlying pace of monetary expansion remains subdued, consistent with contained inflationary pressures over the medium term. looking ahead, we are firmly committed to maintaining price stability in the euro area, in line with our mandate. to this end, the continued firm anchoring of inflation expectations – in line with our aim of maintaining inflation rates below, but close to, 2 % over the medium term – is of the essence. over recent months, a wide range of additional non - standard monetary policy measures has been implemented by the eurosystem. these measures, including in particular two three - year longer - term refinancing operations, were decided upon against the background of exceptional circumstances in the last quarter of 2011. the first impact of these measures has been positive. together with fiscal consolidation and stepped - up structural reforms in several euro area countries, as well as progress towards a stronger euro area economic governance framework, they have contributed to a significant improvement in the financial environment over recent months. we expect that the three - year longer - term refinancing operations will provide further support for the ongoing stabilisation in financial markets and, in particular, for lending activity in the euro area. all our non - standard monetary policy measures are temporary in nature. furthermore, all the necessary tools to address potential upside risks to medium - term price stability are fully available. let me now explain our assessment in greater detail, starting with the economic analysis. real

the outlook for price stability. those risks were largely linked to external factors, and ones which might not be temporary. with inflation already low for some time, we saw a danger that a continued period of low inflation – even if oil - driven – might destabilise inflation expectations and become persistent. that risk was heightened by the fact that “ core ” inflation, which strips out energy and food, was also low. core inflation is not our objective, but it tends to lead headline inflation over the medium - term. all this called for a monetary policy response. and we chose to respond by recalibrating the app because we have ample evidence that it works. bis central bankers ’ speeches i ’ ve described that evidence in detail elsewhere 1, but let me give you just one example. since the middle of 2014, when we launched our credit easing package, bank lending rates have fallen by 80 basis points for the euro area, and by between 100 and 140 basis points in the countries hit hardest by the crisis. to put that in perspective, to have a similar impact on lending rates with conventional policy would ’ ve required a one - off rate cut of 100 basis points. what this shows is that, even when rates are at zero, we can achieve the effect of a sizeable rate cut through unconventional measures. overall, it ’ s clear that the impact of the app on confidence, credit and the economy has been substantial. some may wonder why we go to such lengths to meet our price stability objective. isn ’ t it good for people if inflation is low and things are cheaper? certainly, in the short run, a fall in inflation helps consumers. but if inflation stays too low for too long it actually harms them. and that ’ s particularly the case in a post - debt crisis environment like the one we face in the euro area today. very low inflation complicates the adjustment process within countries, leading to higher unemployment. it delays the rebalancing process across countries, hindering those that lost competitiveness prior to the crisis from regaining it. and if low inflation is unexpected, it raises real debt burdens making it harder for the economy to grow out of debt. for example, if euro area inflation were to undershoot our baseline by just 1 percentage point each year for the next five years, it would increase the private debt ratio by around 6 percentage points. that might not sound like a big figure. but, over five years, it ’ s