Excerpt from the Introductory statement by Mario Draghi, President of the ECB at the European Parliament’s Economic and Monetary Affairs Committee in Brussels on November 12th, 2015:
Incoming data confirm that the recovery in the euro area is progressing moderately. So far, economic activity in the euro area has shown some degree of resilience in the face of external influences that tend to weaken demand. While external demand has receded, euro area exports market shares have increased. The lower cost of energy and our monetary policy measures are supporting consumption and, increasingly, new capital formation.
However, downside risks stemming from global growth and trade are clearly visible. Moreover, inflation dynamics have somewhat weakened, mainly due to lower oil prices and the delayed effects of the stronger euro exchange rate seen earlier in the year. In addition, price pressures – such as from producer prices – remain very subdued. Signs of a sustained turnaround in core inflation have somewhat weakened. While the recovery will gradually strengthen the impulse underlying the inflation process, the protracted economic weakness of the past years continues to weigh on nominal wage growth, and this could moderate price pressures as we move forward. From today’s perspective, this suggests that a sustained normalisation of inflation could take longer than we anticipated in March when we first appraised the overall impact of our measures.
We will closely monitor the risks to price stability and thoroughly assess the strength and persistence of the factors that are slowing the return of inflation to levels below, but close to, 2%. At our December monetary policy meeting, we will re-examine the degree of monetary policy accommodation. We will use as one input the Eurosystem staff projections we will receive in December. Another input will be the work of our staff in consultation with the Eurosystem committees on the monetary policy stimulus that has been achieved so far and the range of instruments available in case more accommodation should be seen as necessary.
If we were to conclude that our medium-term price stability objective is at risk, we would act by using all the instruments available within our mandate to ensure that an appropriate degree of monetary accommodation is maintained. Consistent with our forward guidance, the asset purchase programme is considered to be a particularly powerful and flexible instrument. In fact, we have always said that our purchases would run beyond end-September 2016 in case we do not see a sustained adjustment in the path of inflation that is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term. Other instruments could also be activated to strengthen the impact of the purchase programme if necessary.