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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:
     From Riga meeting Pt 2
     According to Eurostat's flash estimate, euro area annual HICP inflation
increased to 1.9% in May 2018, from 1.2% in April. This reflected higher
contributions from energy, food and services price inflation. On the basis of
current futures prices for oil, annual rates of headline inflation are likely to
hover around the current level for the remainder of the year. While measures of
underlying inflation remain generally muted, they have been increasing from
earlier lows. Domestic cost pressures are strengthening amid high levels of
capacity utilisation, tightening labour markets and rising wages. Uncertainty
around the inflation outlook is receding. Looking ahead, underlying inflation is
expected to pick up towards the end of the year and thereafter to increase
gradually over the medium term, supported by our monetary policy measures, the
continuing economic expansion, the corresponding absorption of economic slack
and rising wage growth.
     This assessment is also broadly reflected in the June 2018 Eurosystem staff
macroeconomic projections for the euro area, which foresee annual HICP inflation
at 1.7% in 2018, 2019 and 2020. Compared with the March 2018 ECB staff
macroeconomic projections, the outlook for headline HICP inflation has been
revised up notably for 2018 and 2019, mainly reflecting higher oil prices.
     Turning to the monetary analysis, broad money (M3) growth stood at 3.9% in
April 2018, after 3.7% in March and 4.3% in February. While the slower momentum
in M3 dynamics over recent months mainly reflects the reduction in the monthly
net asset purchases since the beginning of the year, M3 growth continues to be
supported by the impact of the ECB's monetary policy measures and the low
opportunity cost of holding the most liquid deposits. Accordingly, the narrow
monetary aggregate M1 remained the main contributor to broad money growth,
although its annual growth rate has receded in recent months from the high rates
previously observed.
     The recovery in the growth of loans to the private sector observed since
the beginning of 2014 is proceeding. The annual growth rate of loans to
non-financial corporations stood at 3.3% in April 2018, unchanged from the
previous month, and the annual growth rate of loans to households also remained
stable, at 2.9%.
     The pass-through of the monetary policy measures put in place since June
2014 continues to significantly support borrowing conditions for firms and
households and credit flows across the euro area. This is also reflected in the
results of the latest Survey on the Access to Finance of Enterprises in the euro
area, which indicates that small and medium-sized enterprises in particular
benefited from improved access to financing.
     To sum up, a cross-check of the outcome of the economic analysis with the
signals coming from the monetary analysis confirmed that today's monetary policy
decisions will ensure the ample degree of monetary accommodation necessary for
the continued sustained convergence of inflation towards 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 ongoing broad-based expansion
calls for rebuilding fiscal buffers. This is particularly important in countries
where government debt remains high. All countries would benefit from
intensifying efforts towards achieving a more growth-friendly composition of
public finances. A full, transparent and consistent implementation of the
Stability and Growth Pact and of the macroeconomic imbalance procedure over time
and across countries remains essential to increase 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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