TEXT: ECB President Mario Draghi Press Conference Statement

     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,

Vitor Constancio, Vice-President of the ECB,

Frankfurt am Main, 7 September 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. 

     Based on our regular economic and monetary analyses, we decided to keep the

key ECB interest rates unchanged. We 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 our net asset purchases, at the current monthly pace of E60 billion, are

intended to run until the end of December 2017, 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. The net purchases are made

alongside reinvestments of the principal payments from maturing securities

purchased under the asset purchase programme.

     The incoming information, including our new staff projections, confirms a

broadly unchanged medium-term outlook for euro area economic growth and

inflation. The economic expansion, which accelerated more than expected in the

first half of 2017, continues to be solid and broad-based across countries and

sectors. At the same time, the recent volatility in the exchange rate represents

a source of uncertainty which requires monitoring with regard to its possible

implications for the medium-term outlook for price stability.

     While the ongoing economic expansion provides confidence that inflation

will gradually head to levels in line with our inflation aim, it has yet to

translate sufficiently into stronger inflation dynamics. Measures of underlying

inflation have ticked up slightly in recent months but, overall, remain at

subdued levels. Therefore, a very substantial degree of monetary accommodation

is still needed for underlying inflation pressures to gradually build up and

support headline inflation developments in the medium term. 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 our asset purchase programme in terms of size and/or

duration. This autumn we will decide on the calibration of our policy

instruments beyond the end of the year, taking into account the expected path of

inflation and the financial conditions needed for a sustained return of

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

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

economic analysis. Euro area real GDP increased by 0.6%, quarter on quarter, in

the second quarter of 2017, after 0.5% in the first quarter. Survey data point

to continued broad-based growth in the period ahead. Our monetary policy

measures are supporting domestic demand and have facilitated the deleveraging

process. Private consumption is underpinned by employment gains, which are also

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

The recovery in investment continues to benefit from very favourable financing

conditions and improvements in corporate profitability. Moreover, the

broad-based global recovery will support euro area exports. 

     This assessment is broadly reflected in the September 2017 ECB staff

macroeconomic projections for the euro area. These projections foresee annual

real GDP increasing by 2.2% in 2017, by 1.8% in 2018 and by 1.7% in 2019.

Compared with the June 2017 Eurosystem staff macroeconomic projections, the

outlook for real GDP growth has been revised up for 2017, reflecting the recent

stronger growth momentum, and is broadly unchanged thereafter.

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

the one hand, the current positive cyclical momentum increases the chances of a

stronger than expected economic upswing. On the other hand, downside risks

continue to exist, primarily relating to global factors and developments in

foreign exchange markets.

     Euro area annual HICP inflation was 1.5% in August. Looking ahead, on the

basis of current futures prices for oil, annual rates of headline inflation are

likely to temporarily decline towards the turn of the year, mainly reflecting

base effects in energy prices. At the same time, measures of underlying

inflation have ticked up moderately in recent months, but have yet to show

convincing signs of a sustained upward trend. Domestic cost pressures, notably

from labour markets, are still subdued. Underlying inflation in the euro area is

expected to rise gradually over the medium term, supported by our monetary

policy measures, the continuing economic expansion, the corresponding gradual

absorption of economic slack and rising wages.

     This assessment is also broadly reflected in the September 2017 ECB staff

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

at 1.5% in 2017, 1.2% in 2018 and 1.5% in 2019. Compared with the June 2017

Eurosystem staff macroeconomic projections, the outlook for headline HICP

inflation has been revised down slightly, mainly reflecting the recent

appreciation of the euro exchange rate.

     Turning to the monetary analysis, broad money (M3), despite some monthly

volatility, continues to expand at a robust pace, with an annual rate of growth

of 4.5% in July 2017, after 5.0% in June. As in previous months, annual growth

in M3 was mainly supported by its most liquid components, with the narrow

monetary aggregate M1 expanding at an annual rate of 9.1% in July 2017, down

from 9.7% in June.

     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 2.4% in July 2017, up from 2.0% in June,

while the annual growth rate of loans to households remained stable at 2.6%. 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 a continued

very substantial 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

needs to be substantially stepped up to increase resilience, reduce structural

unemployment and boost euro area growth potential and productivity. Regarding

fiscal policies, 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 imbalances procedure over time and across countries remains

essential to bolster the resilience of the euro area economy. Strengthening

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

the ongoing discussions 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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