MNI: ECB Pres Mario Draghi Press Conference Statem't - 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:

     ===========================================================================

     Introductory statement to the press conference

     Mario Draghi, President of the ECB 

VItor Constancio Vice-President of the ECB 

Frankfurt am Main, 14 December 2017

     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, which was also attended by the President of

the Eurogroup, Mr Dijsselbloem, and 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 for an extended period of time, and well past the horizon of our

net asset purchases.

     Regarding non-standard monetary policy measures, we confirm that from

January 2018 we intend to continue to make net asset purchases under the asset

purchase programme (APP), at a monthly pace of E30 billion, until the end of

September 2018, or beyond, if necessary, and in any case until the Governing

Council sees a sustained adjustment in the path of inflation consistent with its

inflation aim. If the outlook becomes less favourable, or if financial

conditions become inconsistent with further progress towards a sustained

adjustment in the path of inflation, we stand ready to increase the APP in terms

of size and/or duration. The Eurosystem will reinvest the principal payments

from maturing securities purchased under the APP for an extended period of time

after the end of its net asset purchases, and in any case for as long as

necessary. This will contribute both to favourable liquidity conditions and to

an appropriate monetary policy stance.

     Our monetary policy decisions have preserved the very favourable financing

conditions that are still needed for a sustained return of inflation rates

towards levels that are below, but close to, 2%. The incoming information,

including our new staff projections, indicates a strong pace of economic

expansion and a significant improvement in the growth outlook. The strong

cyclical momentum and the significant reduction of economic slack give grounds

for greater confidence that inflation will converge towards our inflation aim.

At the same time, domestic price pressures remain muted overall and have yet to

show convincing signs of a sustained upward trend. An ample degree of monetary

stimulus therefore remains necessary for underlying inflation pressures to

continue to build up and support headline inflation developments over the medium

term. This continued monetary support is provided by the additional net asset

purchases that we decided on at our October monetary policy meeting, by the

sizeable stock of acquired assets and the forthcoming reinvestments, and by our

forward guidance on interest rates.

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

economic analysis. The economic expansion in the euro area continued in the

third quarter of 2017, when real GDP increased by 0.6% quarter on quarter, after

0.7% in the second quarter. The latest data and survey results point to solid

and broad-based growth momentum. Our monetary policy measures, which have

facilitated the deleveraging process, continue to support domestic demand.

Private consumption is underpinned by ongoing employment gains, which are also

benefiting from past labour market reforms, and by rising household wealth.

Business investment continues to strengthen on the back of very favourable

financing conditions, rising corporate profitability and strengthening demand.

Housing investment has also risen further over recent quarters. In addition,

euro area exports are being supported by the broad-based global expansion.

     This assessment is broadly reflected in the December 2017 Eurosystem staff

macroeconomic projections for the euro area. These projections foresee annual

real GDP increasing by 2.4% in 2017, 2.3% in 2018, 1.9% in 2019 and 1.7% in

2020. Compared with the September 2017 ECB staff macroeconomic projections, the

outlook for real GDP growth has been revised up substantially.

     Risks surrounding the euro area growth outlook remain broadly balanced. On

the one hand, the strong cyclical momentum, underpinned by continued positive

developments in sentiment indicators, could lead to further positive growth

surprises in the near term. On the other hand, downside risks continue to relate

primarily to global factors and developments in foreign exchange markets.

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

1.5% in November, up from 1.4% in October. At the same time, measures of

underlying inflation have moderated somewhat recently, in part owing to special

factors. Looking ahead, on the basis of current futures prices for oil, annual

rates of headline inflation are likely to moderate in the coming months, mainly

reflecting base effects in energy prices, before increasing again. Underlying

inflation is expected to rise 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 December 2017 Eurosystem

staff macroeconomic projections for the euro area, which foresee annual HICP

inflation at 1.5% in 2017, 1.4% in 2018, 1.5% in 2019 and 1.7% in 2020. Compared

with the September 2017 ECB staff macroeconomic projections, the outlook for

headline HICP inflation has been revised up, mainly reflecting higher oil and

food prices.

     Turning to the monetary analysis, broad money (M3) continues to expand at a

robust pace, with an annual rate of growth of 5.0% in October 2017, from 5.2% in

September, reflecting 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 continued to be the main contributor to broad money

growth, expanding at an annual rate of 9.4% in October, after 9.8% in September.

     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 increased to 2.9% in October 2017, after 2.4% in

September, while the annual growth rate of loans to households remained stable

at 2.7%.

     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 -- notably 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 the need for an ample degree

of monetary accommodation to secure a sustained return of inflation rates

towards levels that are below, but close to, 2%.

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

policy areas must contribute decisively to strengthening the longer-term growth

potential and reducing vulnerabilities. The implementation of structural reforms

in all 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 increasingly solid and

broad-based expansion strengthens the case 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. Strengthening

Economic and Monetary Union remains a priority. The Governing Council welcomes

the ongoing discussions on completing the banking union and the capital markets

union, and on further enhancing the institutional architecture of our Economic

and Monetary 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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