Extracts from the press conference by Mario DRAGHI, ECB President following the ECB Governing Council meeting:
Première transmission: 05/07/2012
Frankfurt am Main, Germany - ECB
Fin de production: 05/07/2012
On 5 July, Mario Draghi, ECB President commented on the considerations underlying Monetary policy decisions
at 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, ECB President and Vítor Manuel Ribeiro Constâncio ECB Vice-President (3 shots)
||SOUNDBITE (in English) by Mario Draghi: 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.
||Cutaway of the audience
||SOUNDBITE (in English) by Mario Draghi: 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 journalists
||There are at least three sets of reasons why banks may not land, one is risk aversion, the other one is lack of capital and the third is lack of funding. We have removed just the third, not the other two. The second reason is that this lack of transmission between the LTROS (Long Term Refinancing Operation) and further enhancement in credit flows is not the same in all countries, you have countries like France where credit flows actually continues to be sustainable, and you have other countries where credits are actually decreasing. The transmission mechanism is also link with national factors they have to do with the way that banks loan, special contracts with arrangements of different countries. But there is a third consideration and there is the credit is lead now predominately by demand, and if demand is weak you wouldn't expect strong credit growth.
||Wideshot of the audience