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, 3 june 2004. * * * ladies and gentlemen, the vice - president and i will now report on the outcome of today ’ s meeting of the governing council of the ecb. however, i should first like to inform you about some decisions we have taken regarding the publication of staff macroeconomic projections. as you are aware, twice a year eurosystem staff, that is, staff of the ecb and the euro area national central banks, jointly produce a set of macroeconomic projections. these serve as one of the inputs into the deliberations of the governing council. subsequently, the projections are published in the june and december issues of the monthly bulletin. as you also know, in the interim period, that is, for march and september, ecb staff produce what is basically an update of the eurosystem staff projections. these projections also serve as input into the meetings of the governing council, but so far have not been published. the positive experience and familiarity gained over the past few years with the publication of macroeconomic projections have given us the confidence to go a step further by also publishing the interim ecb staff projections. therefore, in the spirit of transparency and accountability, the ecb staff projections will also be published from september 2004 onwards. in all cases, that is, four times a year, the projections will be published in the appropriate form in the monthly bulletin. in addition, as a further step towards providing relevant information in a timely manner, we will from today onwards provide you with an advance copy of the monthly bulletin section covering the projections. this advance copy will be made available shortly after the end of this press conference, both in hard copy and on the ecb ’ s website. the same procedure will be applied in september and every three months thereafter. the fact that we have decided to publish the interim ecb staff projections in future does not change their role as one of the inputs into our deliberations. the governing council continues to base its monetary policy decisions on a comprehensive economic analysis, which is cross - checked with the monetary analysis. let me now turn to today ’ s monetary policy discussion. in summary, we noted that the economic recovery has strengthened over recent months. at the same time, we have also witnessed stronger inflationary pressures over the

it would have to rise a long way – and certainly by a lot more than is currently priced into government bond markets – even for household interest payments to return to that average. the fact that mortgage debt is higher than it was a generation ago doesn ’ t make it “ unsustainable ”. third, the fact that growth rates are better indicators than levels may be telling us something more fundamental, not just that there are structural differences in affordability. in particular, it could be that the things that drive speculative, riskier lending tend to develop faster than the fundamentals that determine more sustainable levels of debt. those fundamentals can vary ( the decline in the neutral rate of interest is an example ), the sustainable level of debt along with them. but perhaps they usually do so only gradually. if so, very rapid growth of debt would often be a sign of something else – of looser credit supply and a rise in the proportion of lending that ’ s riskier, less sustainable and more prone to default. it is these episodes of looser supply that most concern policy makers, including the bank ’ s financial policy committee, and they do seem more prevalent at times of rapid growth in credit. the mortgage boom of the late 1980s in the uk was accompanied by much higher loan - to - values and other signs of easier credit supply than anything in the past 20 years. there is evidence more generally that rapid growth in corporate debt tends to coincide with deteriorations in the quality of credit. the recent surge in leveraged lending to companies, including those in the uk, may be one such episode. all speeches are available online at www. bankofengland. co. uk / speeches in what follows i ’ ll go through these points in a little more detail. i ’ ll make some remarks about the particular characteristics of student and car loans. i ’ ll explain how aggregate mortgage debt evolves over time and why the most reasonable forecast over the next few years is for relatively subdued rates of growth. ( that ’ s why, barring a rise in interest rates well beyond what ’ s priced in the yield curve, interest payments on mortgages are likely to remain below the pre - crisis average ). there ’ s then some stuff on the recent surge in leveraged lending to companies. the silver lining here is that uk banks look to be relatively uninvolved in this activity. most of the investors seem to be non - uk institutions and the channels that so disastrously amplified default