FRANKFURT (Reuters) – The European Central Bank left its policy stance unchanged as expected on Thursday, keeping a rate hike later this year on the table even as the euro zone economy suffers its biggest slowdown in half a decade.
European Central Bank (ECB) President Mario Draghi holds a news conference, in Frankfurt, Germany January 24, 2019. REUTERS/Kai Pfaffenbach
Following are highlights of ECB President Mario Draghi’s comments at a press conference after the bank’s policy meeting.
ASSESSMENT, NOT POLICY DISCUSSION
“Today, we didn’t discuss the (policy) implications (of changing balance of risk). Today’s meeting was essentially devoted to an assessment – where are we and why are we here, how long will the slowdown last, is the slowdown going to worsen or stay as a shallow lower path? These were the questions that were asked.”
UNDERLYING INFLATION MUTED
“Headline inflation is likely to decline further over the coming months. Measures of underlying inflation remain generally muted, but labor cost pressures are continuing to strengthen and broaden amid high levels of capacity utilization and tightening labor markets.”
“Looking ahead, underlying inflation is expected to increase over the medium term, supported by our monetary policy measures, the ongoing economic expansion and rising wage growth.”
“The near-term growth momentum is likely to be weaker than previously anticipated.”
SLOWER GLOBAL EXPANSION
“Looking ahead, the euro area expansion will continue to be supported by favorable financing conditions, further employment gains and rising wages, lower energy prices and the ongoing albeit somewhat slower expansion in global activity.”
SIGNIFICANT STIMULUS ESSENTIAL
“Significant monetary policy stimulus remains essential to support the further buildup of domestic price pressures and headline inflation developments over the medium term.
“This will be provided by our forward guidance on the key ECB interest rates, reinforced by the reinvestments of the sizable stock of acquired assets.”
READY TO ADJUST ALL INSTRUMENTS
“The Governing Council stands ready to adjust all of its instruments as appropriate to ensure that inflation continues to move toward the Governing Council’s inflation aim in a sustained manner.”
“We intend to continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase program for an extended period of time past the date when we start raising the key ECB interest rates, and in any case for as long as necessary.”
WAGE GROWTH UNDERPINS
“Supportive financing conditions, favorable labor market dynamics and rising wage growth continue to underpin the euro area expansion and gradually rising inflation pressures.”
“This supports our confidence in the continued sustained convergence of inflation to levels that are below, but close to 2 percent over the medium term.”
“The risks surrounding the euro area growth outlook have moved to the downside on account of the persistence of uncertainties related to the geopolitical factors and the threat of protectionism, vulnerabilities in emerging markets and financial market volatility.”
“The persistence of uncertainties, in particular relating to geopolitical factors and the threat of protectionism, is weighing on economic sentiment.”
SOFT DEMAND OUTSIDE EURO ZONE
“The incoming information has continued to be weaker than expected on account of softer external demand and some country and sector-specific factors.”