Extracts from the press conference by Mario Draghi, President of the ECB, following the ECB Governing Council meeting
Type: Summary of press conference
End production: 05/07/2012 First transmission: 05/07/2012
On 5 July 2012, Mario Draghi, President of the European Central Bank (ECB), commented on the considerations underlying monetary policy decisions during a press conference.
At the meeting, the Governing Council of the ECB took the following monetary policy decisions:
The interest rate on the main refinancing operations of the Eurosystem will be decreased by 25 basis points to 0.75%, starting from the operation to be settled on 11 July 2012;
The interest rate on the marginal lending facility will be decreased by 25 basis points to 1.50%, with effect from 11 July 2012;
The interest rate on the deposit facility will be decreased by 25 basis points to 0.00%, with effect from 11 July 2012.
Only the original language version is authentic and it prevails in the event of its differing from the translated versions.
||Arrival of Mario Draghi, President of the European Central Bank (ECB), at the press conference (3 shots)
||Soundbite by Mario Draghi (in ENGLISH): Based on our regular economic and monetary analyses, we decided to cut the key ECB interest rates by 25 basis points. Inflationary pressure over the policy-relevant horizon has been dampened further as some of the previously identified downside risks to the euro area growth outlook have materialised. Consistent with this picture, the underlying pace of monetary expansion remains subdued. Inflation expectations for the euro area economy continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. At the same time, economic growth in the euro area continues to remain weak, with heightened uncertainty weighing on confidence and sentiment.
||General view of the press conference
||Soundbite by Mario Draghi (in ENGLISH): On a quarterly basis, euro area real GDP growth was flat in the first quarter of 2012, following a decline of 0.3% in the previous quarter. Indicators for the second quarter of 2012 point to a renewed weakening of economic growth and heightened uncertainty. Looking beyond the short term we expect the euro area economy to recover gradually, although with momentum dampened by a number of factors. In particular, tensions in some euro area sovereign debt markets and their impact on credit conditions, the process of balance sheet adjustment in the financial and non-financial sectors and high unemployment are expected to weigh on the underlying growth momentum.
||Cutaway of photographers
||Soundbite by Mario Draghi (in ENGLISH): There are at least three sets of reasons why banks may not lend. One is risk aversion, another is a lack of capital, and the third is a lack of funding. We have removed only the third, not the other two. The second reason is that this lack of transmission between the LTROs and a further enhancement of credit flows is not the same in all countries. You have countries like France, where credit flows actually continue to be moderately sustained, and you have other countries where credit flows are actually decreasing, which leads us to think that the transmission mechanism is also linked to national factors. They have to do with the way banks lend, special contracts, the contractual arrangements of different countries. But there is a third consideration, and that is that credit is now led predominantly by demand, and if demand is weak, you would not expect strong credit growth.
||General views of the press conference (2 shots)