MNI: ECB Pres Mario Draghi Press Conference Statement - Text2

--Continued

     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:

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     From Riga meeting Pt 2

     continued

     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: les.commons@marketnews.com

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