MNI: ECB On Hold, To Set Terms Of TLTRO At Future Meet: Text

     LONDON (MNI) - Below is the text of the Introductory Statement at the press

conference following the April 10 Governing Council meeting, released by the

European Central Bank.

     Mario Draghi, President of the ECB 

     Luis de Guindos, Vice-President of the ECB 

     Frankfurt am Main 

     10 April 2019 

     INTRODUCTORY STATEMENT

     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. We continue to expect them to remain at their

present levels at least through the end of 2019, and in any case for as long as

necessary to ensure the continued sustained convergence of inflation to levels

that are below, but close to, 2% over the medium term.

     We intend to continue reinvesting, in full, the principal payments from

maturing securities purchased under the asset purchase programme for an extended

period of time past the date when we start raising the key ECB interest rates,

and in any case for as long as necessary to maintain favourable liquidity

conditions and an ample degree of monetary accommodation.

     The Governing Council stands ready to adjust all of its instruments, as

appropriate, to ensure that inflation continues to move towards the Governing

Council's inflation aim in a sustained manner.

     Details on the precise terms of the new series of targeted longer-term

refinancing operations (TLTROs) will be communicated at one of our forthcoming

meetings. In particular, the pricing of the new TLTRO-III operations will take

into account a thorough assessment of the bank-based transmission channel of

monetary policy, as well as further developments in the economic outlook. In the

context of our regular assessment, we will also consider whether the

preservation of the favourable implications of negative interest rates for the

economy requires the mitigation of their possible side effects, if any, on bank

intermediation.

     The information that has become available since the last Governing Council

meeting in early March confirms slower growth momentum extending into the

current year. While there are signs that some of the idiosyncratic domestic

factors dampening growth are fading, global headwinds continue to weigh on euro

area growth developments. The persistence of uncertainties, related to

geopolitical factors, the threat of protectionism and vulnerabilities in

emerging markets, is leaving marks on economic sentiment. At the same time,

further employment gains and rising wages continue to underpin the resilience of

the domestic economy and gradually rising inflation pressures. However, an ample

degree of monetary accommodation remains necessary to safeguard favourable

financing conditions and support the economic expansion, and thus to ensure that

inflation remains on a sustained path towards levels that are below, but close

to, 2% over the medium term. Significant monetary policy stimulus is being

provided by our forward guidance on the key ECB interest rates, reinforced by

the reinvestments of the sizeable stock of acquired assets and the new series of

TLTROs.

     Let me now explain our assessment in greater detail, starting with the

economic analysis. Euro area real GDP rose by 0.2%, quarter on quarter, in the

fourth quarter of 2018, following an increase of 0.1% in the third quarter.

Incoming data continue to be weak, especially for the manufacturing sector,

mainly on account of the slowdown in external demand, which has been compounded

by some country and sector-specific factors. As the impact of these factors is

turning out to be somewhat longer-lasting, the slower growth momentum is

expected to extend into the current year. Looking ahead, the effect of these

adverse factors is expected to unwind. The euro area expansion will continue to

be supported by favourable financing conditions, further employment gains and

rising wages, and the ongoing - albeit somewhat slower - expansion in global

activity.

     The risks surrounding the euro area growth outlook remain tilted to the

downside, on account of the persistence of uncertainties related to geopolitical

factors, the threat of protectionism and vulnerabilities in emerging markets.

     According to Eurostat's flash estimate, euro area annual HICP inflation was

1.4% in March 2019, after 1.5% in February, reflecting mainly a decline in food,

services and non-energy industrial goods price inflation. On the basis of

current futures prices for oil, headline inflation is likely to decline over the

coming months. Measures of underlying inflation remain generally muted, but

labour cost pressures have strengthened and broadened amid high levels of

capacity utilisation and tightening labour markets. Looking ahead, underlying

inflation is expected to increase over the medium term, supported by our

monetary policy measures, the ongoing economic expansion and rising wage growth.

     Turning to the monetary analysis, broad money (M3) growth increased to 4.3%

in February 2019, from 3.8% in January. Looking through some volatility in

monthly flows, M3 growth continues to be backed by bank credit creation,

notwithstanding a recent moderation in credit dynamics. The narrow monetary

aggregate M1 remained the main contributor to broad money growth.

     The annual growth rate of loans to non-financial corporations rebounded to

3.7% in February 2019, from 3.4% in January, reflecting mainly a base effect.

Looking through short-term volatility, the annual growth rate of loans to

non-financial corporations has moderated in recent months, reflecting the

typical lagged reaction to the slowdown in economic growth. At the same time,

the annual growth rate of loans to households remained broadly unchanged at 3.3%

in February. The euro area bank lending survey for the first quarter of 2019

suggests that overall bank lending conditions remained favourable.

     Our monetary policy measures, including the new series of TLTROs that we

announced in March, will help to safeguard favourable bank lending conditions

and will continue to support access to financing, in particular for small and

medium-sized enterprises.

     To sum up, a cross-check of the outcome of the economic analysis with the

signals coming from the monetary analysis confirmed that an ample degree of

monetary accommodation is still necessary for the continued sustained

convergence of inflation to levels that are below, but close to, 2% over the

medium term.

     In order to reap the full benefits from our monetary policy measures, other

policy areas must contribute more decisively to raising the longer-term growth

potential and reducing vulnerabilities. The implementation of structural reforms

in euro area countries needs to be substantially stepped up to increase

resilience, reduce structural unemployment and boost euro area productivity and

growth potential. Regarding fiscal policies, the mildly expansionary euro area

fiscal stance and the operation of automatic stabilisers are providing support

to economic activity. At the same time, countries where government debt is high

need to continue rebuilding fiscal buffers. All countries should reinforce their

efforts to achieve a more growth-friendly composition of public finances.

Likewise, the transparent and consistent implementation of the European Union's

fiscal and economic governance framework over time and across countries remains

essential to bolster the resilience of the euro area economy. Improving the

functioning of Economic and Monetary Union remains a priority. The Governing

Council welcomes the ongoing work and urges further specific and decisive steps

to complete the banking union and the capital markets union.

     We are now at your disposal for questions.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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