3 Min Read
BRUSSELS, Sept 22 (Reuters) - Following are comments by European Central Bank President Mario Draghi, speaking at a quarterly hearing before the European Parliament's Committee on Economic and Monetary Affairs on Monday.
We stand ready to use additional unconventional instruments within our mandate, and alter the size and/or the composition of our unconventional interventions should it become necessary to further address risks of a too prolonged period of low inflation.
Courageous structural reforms and improvements in the competitiveness of the corporate sector are key to improving business environment. This would foster the urgently needed investment and create greater demand for credit. Structural reforms thus crucially complement the ECB's accommodative monetary policy stance and further empower the effective transmission of monetary policy.
While it is yet too early to assess the impact of the TLTROs on the broader economy, their announcement already had a noticeable positive impact on financial market sentiment.
Overall, we expect the TLTROs to act as a powerful tool to strengthen the transmission of monetary policy and facilitate new credit flows to the real economy, given the predominantly bank-based financing structure of the euro area economy.
Under the ABS purchase programme we will be purchasing senior and guaranteed mezzanine tranches. Regarding senior securities, we would buy only those assets that are eligible for Eurosystem operations. So, we have ample experience with managing and understanding the risks associated with this asset class.
The total stock of eligible securities which is currently outstanding - held in investors' portfolios or retained by the originating banks - is already sizeable. We are confident that it will grow as a result of our presence in the market.
Over time, as our purchases contribute to a normalisation in trading conditions, secondary market and issuance activity will expand in those segments that are currently inactive.
The economic recovery in the euro area is losing momentum. Following some moderate expansion in recent quarters, growth of the euro area real GDP came to a halt in the second quarter of this year. The early information on economic conditions which we received over the summer has been somewhat weaker than expected.
Unacceptably high unemployment and continued weak credit growth are likely to curb the strength of the recovery. The risks surrounding the expected expansion are clearly on the downside. In particular, heightened geopolitical tensions could dampen business and consumer confidence. Risks of insufficient structural reforms could weigh on the business environment.
We will closely monitor risks to price developments looking forward. We will focus in particular on the possible repercussions of dampened growth dynamics, geopolitical developments, exchange rate developments and the pass-through of our monetary policy measures.
Editing by Hugh Lawson