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MNI (London)
     LONDON (MNI) - Below is the text released by the European Central Bank
Governing Council of President Mario Draghi's opening statement at the post
council meeting:
     Mario Draghi, President of the ECB, 
Luis de Guindos, Vice-President of the ECB, 
     Frankfurt am Main, 25 October 2018 
     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, which was also attended by the Commission
Vice-President, Mr Dombrovskis.
     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 summer 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.
     Regarding non-standard monetary policy measures, we will continue to make
net purchases under the asset purchase programme (APP) at the new monthly pace
of E15 billion until the end of December 2018. We anticipate that, subject to
incoming data confirming our medium-term inflation outlook, we will then end net
purchases. We intend to reinvest the principal payments from maturing securities
purchased under the APP for an extended period of time after the end of our net
asset purchases, and in any case for as long as necessary to maintain favourable
liquidity conditions and an ample degree of monetary accommodation.
     Incoming information, while somewhat weaker than expected, remains overall
consistent with an ongoing broad-based expansion of the euro area economy and
gradually rising inflation pressures. The underlying strength of the economy
continues to support our confidence that the sustained convergence of inflation
to our aim will proceed and will be maintained even after a gradual winding-down
of our net asset purchases. At the same time, uncertainties relating to
protectionism, vulnerabilities in emerging markets and financial market
volatility remain prominent. Significant monetary policy stimulus is still
needed to support the further build-up of domestic price pressures and headline
inflation developments over the medium term. This support will continue to be
provided by the net asset purchases until the end of the year, by the sizeable
stock of acquired assets and the associated reinvestments, and by our enhanced
forward guidance on the key ECB interest rates. In any event, 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.
     Let me now explain our assessment in greater detail, starting with the
economic analysis. Euro area real GDP increased by 0.4%, quarter on quarter, in
both the first and the second quarter of 2018. Incoming information, while
somewhat weaker than expected, remains overall consistent with our baseline
scenario of an ongoing broad-based economic expansion, supported by domestic
demand and continued improvements in the labour market. Some recent
sector-specific developments are having an impact on the near-term growth
profile. Our monetary policy measures continue to underpin domestic demand.
Private consumption is fostered by ongoing employment growth and rising wages.
At the same time, business investment is supported by solid domestic demand,
favourable financing conditions and corporate profitability. Housing investment
remains robust. In addition, the expansion in global activity is expected to
continue supporting euro area exports, though at a slower pace.
     The risks surrounding the euro area growth outlook can still be assessed as
broadly balanced. At the same time, risks relating to protectionism,
vulnerabilities in emerging markets and financial market volatility remain
     Euro area annual HICP inflation increased to 2.1% in September 2018, from
2.0% in August, reflecting mainly higher energy and food price inflation. On the
basis of current futures prices for oil, annual rates of headline inflation are
likely to hover around the current level over the coming months. While measures
of underlying inflation remain generally muted, they have been increasing from
earlier lows. Domestic cost pressures are strengthening and broadening amid high
levels of capacity utilisation and tightening labour markets. Looking ahead,
underlying inflation is expected to pick up towards the end of the year and to
increase further 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 stood at 3.5% in
September 2018, after 3.4% in August. Apart from some volatility in monthly
flows, M3 growth is increasingly supported by bank credit creation. The narrow
monetary aggregate M1 remained the main contributor to broad money growth.
     The growth of loans to the private sector strengthened further, continuing
the upward trend observed since the beginning of 2014. The annual growth rate of
loans to non-financial corporations rose to 4.3% in September 2018, from 4.1% in
August, while the annual growth rate of loans to households stood at 3.1%,
unchanged from the previous month. The euro area bank lending survey for the
third quarter of 2018 indicates that loan growth continues to be supported by
increasing demand across all loan categories and favorable bank lending
conditions for loans to enterprises and loans for house purchase.
     The pass-through of the monetary policy measures put in place since June
2014 continues to significantly support borrowing conditions for firms and
households, access to financing - in particular for small and medium-sized
enterprises - and credit flows across the euro area.
     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 broad-based expansion calls for
rebuilding fiscal buffers. This is particularly important in countries where
government debt is high and for which full adherence to the Stability and Growth
Pact is critical for safeguarding sound fiscal positions. Likewise, the
transparent and consistent implementation of the EU'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 urges 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:
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