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, 6 november 2003. * * * ladies and gentlemen, today marks the first time that i had the honour and the pleasure of chairing the meeting of the governing council of the ecb. i am delighted to now proceed with our well - established practice of real - time communication and to report on the outcome of our meeting, together with the vicepresident. following our regular economic and monetary analysis, we have decided to leave the key ecb interest rates unchanged at their low levels. overall, we anticipate some further stickiness of inflation rates in the shorter term, while the medium - term outlook for price stability remains favourable. against this background, we continue to judge the current stance of monetary policy as appropriate. at the same time, we see additional signs of a gradual economic recovery in the euro area. we will carefully monitor all developments that might affect our assessment of risks to price stability. let me now explain our decision in more detail. starting with the economic analysis, new data and other information show that the recovery of the world economy is clearly making progress. also for the euro area, the indicators are increasingly pointing towards some improvement in economic activity in the second half of this year. for the time being, this is primarily reflected in business surveys and leading indicators, but we expect that forthcoming data on euro area production and demand will confirm that a gradual recovery has started. taken together, we see further confirmation of our main scenario of a gradual improvement in economic activity this year, and a broadening and strengthening in the course of 2004. this assessment has received support from recently published forecasts of official and private sources, as well as from developments in financial markets. externally, the expansion of global economic trade and real gdp growth should counteract the changes in the effective exchange rate of the euro, which is back to its level of early 1999. domestically, the conditions for investment should improve further, given the continued adjustment efforts of firms to enhance productivity and profitability, the low level of interest rates and generally favourable financing conditions. moreover, private consumption should benefit from real disposable income growth, fostered by positive terms - of - trade effects stemming from the past appreciation of the euro. the short - term risks to our main scenario appear to be balanced

runs of unprecedented speed and scale, magnifying the effects of such a crisis. banks might manage to render their deposits more attractive than central bank ones. they could, for instance, provide additional services to those offered by central banks. such services could include paying bills, or cross - selling financial insurance products. otherwise – even in the absence of a crisis – a readily convertible cbdc could crowd out bank deposits, leading to the disintermediation of the banking sector. this could have far - reaching implications for the structure of the financial system and for the ability of central banks to perform their core tasks and ensure that their monetary policy is transmitted to the real economy. if the central bank were to take retail deposits, it might also have to provide loans, with all the ensuing consequences. the central bank would need to launch customer - facing business lines. deposit and lending facilities would also require the central bank to take on the burden of regulatory compliance in areas such as anti - money laundering, consumer protection and confidentiality. some argue that this may reinforce monetary sovereignty, as disintermediation would make the financial system safer and reduce the moral hazard of banks by diminishing their role in money creation. 5 but disintermediation would be economically inefficient and legally untenable. the eu treaty provides for the ecb to operate in an open market economy, essentially reflecting a policy choice in favour of decentralised market decisions on the optimal allocation of resources. historical cases of economy - wide resource allocation by central banks are hardly models of efficiency or good service. furthermore, a retail cbdc would create a disproportionate concentration of power in the central bank. these potentially highly adverse effects on the financial system would appear to outweigh the benefits envisaged by the introduction of a retail cbdc. what, then, could be done to mitigate the impact of a cbdc on the financial system? one option could be to remunerate cbdc at below - market rates in order to create incentives for non - banks to rely more on market - based alternatives rather than on central bank deposits. the drawback would be that, in times of crisis, it may become necessary to apply highly negative rates, which could generate criticism from the public and substantially undermine public confidence in the central bank as well as in the basic values of saving which underlie our societies. another option is a tiered remuneration system. 6 in line with