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:

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

     Introductory statement to the press conference

     Mario Draghi, President of the ECB 

VItor ConstAncio Vice-President of the ECB 

Frankfurt am Main, 26 October 2017

     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, today we conducted a

thorough assessment of the outlook for inflation, the risks surrounding this

outlook and our monetary policy stance. As a result, the Governing Council took

the following decisions in pursuit of its price stability objective.

     First, the key ECB interest rates were kept unchanged and 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.

     Second, as regards non-standard monetary policy measures, we will continue

to make purchases under the asset purchase programme (APP) at the current

monthly pace of E60 billion until the end of December 2017. From January 2018

our net asset purchases are intended to continue 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.

     Third, 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.

     And fourth, we also decided to continue to conduct the main refinancing

operations and three-month longer-term refinancing operations as fixed rate

tender procedures with full allotment for as long as necessary, and at least

until the end of the last reserve maintenance period of 2019.

     Today's monetary policy decisions were taken to preserve 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

recalibration of our asset purchases reflects growing confidence in the gradual

convergence of inflation rates towards our inflation aim, on account of the

increasingly robust and broad-based economic expansion, an uptick in measures of

underlying inflation and the continued effective pass-through of our policy

measures to the financing conditions of the real economy. At the same time,

domestic price pressures are still muted overall and the economic outlook and

the path of inflation remain conditional on continued support from monetary

policy. Therefore, an ample degree of monetary stimulus 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, 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 continues to be solid

and broad-based. Real GDP increased by 0.7%, quarter on quarter, in the second

quarter of 2017, after 0.6% in the first quarter. The latest data and survey

results point to unabated growth momentum in the second half of this year. Our

monetary policy measures have facilitated the deleveraging process and continue

to support domestic demand. Private consumption is underpinned by rising

employment, which is also benefiting from past labour market reforms, and by

increasing household wealth. The upswing in business investment continues to

benefit from very favourable financing conditions and improvements in corporate

profitability. Construction investment has also strengthened. In addition, the

broad-based global recovery is supporting euro area exports.

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

the one hand, the strong cyclical momentum, as evidenced in recent developments

in sentiment indicators, could lead to further positive growth surprises. On the

other hand, downside risks continue to relate primarily to global factors and

developments in foreign exchange markets.

     Euro area annual HICP inflation remained unchanged at 1.5% in September.

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 since early 2017, but

have yet to show more convincing signs of a sustained upward trend. Wage growth

has increased somewhat, but domestic cost pressures still remain subdued

overall. Underlying inflation in the euro area is expected to continue 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 wage growth.

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

robust pace, with an annual rate of growth of 5.1% in September 2017, after 5.0%

in August. 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 9.7% in September 2017, up from 9.5% in August.

     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 2.5% in September 2017, after 2.4% in

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

2.7%. The euro area bank lending survey for the third quarter of 2017 indicates

that net loan demand has continued to increase for all loan categories. Credit

standards have further eased for loans to households, while they remained

broadly unchanged for loans to enterprises. Banks' overall terms and conditions

on new loans have continued to ease for all categories of loans.

     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 to recalibrate the

policy instruments to ensure the degree of monetary accommodation necessary 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, 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 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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