FRANKFURT (MNI) – The following is the verbatim text of the opening
statement by European Central Bank President Mario Draghi at his press
conference following today’s monthly monetary policy meeting of the
ECB’s Governing Council.
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 todays meeting of the Governing Council, which was also attended by
the Commission Vice-President, Mr Rehn.
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 mid-January broadly confirms our previous
assessment. Inflation is likely to stay above 2% for several months to
come, before declining to below 2%. Available survey indicators confirm
some tentative signs of a stabilisation in economic activity at a low
level around the turn of the year, but the economic outlook remains
subject to high uncertainty and downside risks. The underlying pace of
monetary expansion remains subdued.
Looking ahead, it is essential for monetary policy to maintain
price stability for the euro area as a whole. This ensures a firm
anchoring of inflation expectations in line with our aim of maintaining
inflation rates below, but close to, 2% over the medium term. Such
anchoring is a prerequisite for monetary policy to make its contribution
to supporting economic growth and job creation in the euro area. A very
thorough analysis of all incoming data and developments over the period
ahead is warranted.
Through our non-standard monetary policy measures we will continue
to support the functioning of the euro area financial sector, and thus
the financing of the real economy. Since the first three-year
longer-term refinancing operation (LTRO) was conducted in December 2011
we have approved specific national eligibility criteria and risk control
measures for the temporary acceptance in a number of countries of
additional credit claims as collateral in Eurosystem credit operations,
which should lead to an increase in available collateral. Further
details will be provided in a press release to be published today at
3.30 p.m. At the start of the current reserve maintenance period on 18
January 2012 the reserve ratio was reduced, freeing up additional
collateral. As stated on previous occasions, all our non-standard
measures are temporary in nature.
Let me now explain our assessment in greater detail, starting with
the economic analysis. Real GDP growth in the fourth quarter of 2011 is
likely to have been very weak. According to the survey data for the last
two months, there are tentative signs of a stabilisation in economic
activity at a low level.
Looking ahead, we expect the euro area economy to recover very
gradually in the course of 2012. The very low short-term interest rates
and all the measures taken to foster the proper functioning of the euro
area financial sector are lending support to the euro area economy.
Moreover, stress in financial markets has diminished in response to our
monetary policy measures, but also in response to the progress made
towards a stronger euro area governance framework and intensified fiscal
consolidation in several euro area countries. However, subdued global
demand growth, the remaining tensions in euro area sovereign debt
markets and their impact on credit conditions, as well as the process of
balance sheet adjustment in the financial and non-financial sectors,
continue to dampen the underlying growth momentum.
This outlook is subject to downside risks. They notably relate to
tensions in euro area debt markets and their potential spillover to the
euro area real economy. Downside risks also relate to possible adverse
developments in the global economy, higher than assumed increases in
commodity prices, protectionist pressures and the potential for a
disorderly correction of global imbalances.
Euro area annual HICP inflation was 2.7% in January 2012, according
to Eurostats flash estimate, unchanged from December. The average
inflation rate for 2011 was 2.7%, mainly driven by higher energy and
other commodity prices. Looking ahead, inflation is likely to stay above
2% for several months to come, before declining to below 2%. This
pattern reflects the expectation that, in an environment of weak growth
in the euro area and globally, underlying price pressures in the euro
area should remain limited.
Risks to the medium-term outlook for price developments remain
broadly balanced. On the upside, they relate to higher than assumed
increases in indirect taxes and administered prices, as well as
increases in commodity prices. The main downside risks relate to the
impact of weaker than expected growth in the euro area and globally.
The monetary analysis indicates that the underlying pace of
monetary expansion remains subdued. The annual growth rate of M3
decreased to 1.6% in December 2011, after 2.0% in November, reflecting a
further weakening of monetary dynamics towards the end of the year.
The annual growth rates of loans to non-financial corporations and
loans to households, adjusted for loan sales and securitisation, also
decreased further in December, and stood at 1.2% and 1.9% respectively.
The volume of MFI loans to both sectors declined in December, and this
was particularly pronounced in the case of the non-financial corporate
sector. In addition, there are indications that bank lending conditions
tightened further, affecting loan supply in several euro area countries
in late 2011.
It is not yet possible to draw firm conclusions from these
developments, particularly given that the impact of the first three-year
LTRO on bank funding is still unfolding and may not have been fully
reflected in the most recent bank lending survey. In addition, other
non-standard monetary policy measures announced in December are still to
be implemented. Accordingly, close scrutiny of credit developments in
the period ahead is essential.
The soundness of bank balance sheets will be a key factor in
facilitating an appropriate provision of credit to the economy over
time. It is essential that the implementation of banks recapitalisation
plans does not result in developments that are detrimental to the
financing of economic activity in the euro area.
To sum up, the economic analysis indicates that underlying price
pressures should remain limited and risks to the medium-term outlook for
price developments remain broadly balanced. A cross-check with the
signals from the monetary analysis confirms this picture.
A combination of structural reforms and fiscal discipline is
essential for boosting confidence and delivering a favourable
environment for sustainable growth. Regarding fiscal policies, all euro
area governments need to continue to do their utmost to ensure fiscal
sustainability. It is essential that all countries adhere to the fiscal
targets they announced for 2012. This should help to anchor expectations
of sound fiscal policies and strengthen confidence.
The rules guiding the design and implementation of national fiscal
policies are being strengthened at the EU level as well as in the legal
frameworks of several Member States. These are important steps in the
right direction. With regard to structural reforms, these are key to
increasing the adjustment capacity and competitiveness of euro area
countries, thereby strengthening growth prospects and job creation.
Notably, far-reaching and ambitious reforms should be implemented to
foster competition in product markets, particularly in services sectors,
while rigidities in labour markets should be reduced and wage
flexibility should be enhanced.