european central bank : press conference - introductory statement introductory statement by mr jean - claude trichet, president of the european central bank and mr lucas papademos, vice - president of the european central bank, frankfurt am main, 7 april 2005. * * * ladies and gentlemen, it is our pleasure to welcome you to this press conference. the vice - president and i will now report on the outcome of today ’ s meeting of the governing council of the ecb, which was also attended by commissioner almunia. all in all, we have not changed our assessment of risks to price stability over the medium term. so far, we have seen no significant evidence of underlying domestic inflationary pressures building up in the euro area. accordingly, we have left the key ecb interest rates unchanged. both nominal and real interest rates are at exceptionally low levels, lending ongoing support to economic activity. however, upside risks to price stability over the medium term remain and continued vigilance is therefore of the essence. i shall now explain our assessment in more detail, turning first to the economic analysis. recent data and survey indicators on economic activity have been mixed. in general they point to ongoing economic growth at a moderate pace over the short term, with no clear signs as yet of a strengthening in underlying dynamics. looking further ahead, the conditions remain in place for moderate economic growth to continue. global growth remains solid, providing a favourable environment for euro area exports. on the domestic side, investment is expected to continue to be supported by very favourable financing conditions, improved profits and greater business efficiency. consumption growth should develop in line with real disposable income growth. however, at the same time, persistently high oil prices in particular pose downside risks to growth. turning to consumer prices, eurostat ’ s flash estimate for annual hicp inflation was 2. 1 % in march, unchanged from february. in the coming months, annual inflation rates are likely to remain somewhat above 2 %, although the exact figure will depend largely on how oil prices develop. looking further ahead, so far we have seen no significant evidence of underlying domestic inflationary pressures building up in the euro area. wage increases have remained contained over recent quarters and, in the context of moderate economic growth and weak labour markets, this trend is likely to continue for the time being. however, upside risks to price stability remain. given recent oil price rises, it is once again paramount that second - round effects stemming from wage and price - setting

bank of england repo rat e chart 11 : composition of uk pnfc sector gross debt ot her debt securit ies ot her t han shares borrowing from non - uk resident mfis borrowing from uk resident mfis per cent chart 12 : corporate credit spreads basis points basis points high yield ( lhs ) bbb ( rhs ) aa ( rhs ) aaa ( rhs ) source : m errill ly nch op tion - adjusted corp orate bond sp reads chart 13 : share of world imports in world gdp 1995 = 1 1. 5 1. 2 0. 9 0. 6 0. 3 0. 0 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 source : un ( pre - 1980 ) ; imf weo summer 2004 database ( post - 1980 ) chart 14 : import shares in consumption and business investment expenditures per cent business investment consumption table 3 : value of sales over the internet by uk non - financial sectors £bn households business - to - total business 6. 4 11. 4 12. 7 28. 2 19. 0 39. 5 source : ons chart 15 : distribution sector profits ( margins ) percentage of output at basic prices 25. 0 retail 20. 0 total distribution sector 15. 0 wholesale 10. 0 5. 0 0. 0 chart 16 : output price inflation and cpi goods price inflation percentage change on a year earlier 4. 0 3. 0 producer output prices 2. 0 1. 0 0. 0 - 1. 0 cpi goods - 2. 0 - 3. 0 chart 17 : domestically produced manufactured goods : costs and prices percentage change on a year earlier percentage changes on a year earlier 8. 0 input prices ( lhs ) 15. 0 10. 0 unit wage costs ( rhs ) 6. 0 4. 0 5. 0 2. 0 0. 0 0. 0 - 2. 0 - 5. 0 - 4. 0 - 10. 0 output prices ( rhs ) - 6. 0 - 15. 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 - 8. 0 chart 18 : private sector productivity percentage changes on a year earlier 5. 0 per hour 4. 0 per head 3. 0 2. 0 1. 0 per job 0. 0 source : lfs, workforce jobs dat a and bank chart 19 : private sector factor utilisation ( based on production functions ) elasticity of substitution = 0. 5 elasticity of substitution = 1 percentage deviation of