MNI: ECB Pres Mario Draghi Press Conference Statement - Text

     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

prominent.

     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: les.commons@marketnews.com

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