FRANKFURT, March 6 The European Central Bank
left interest rates unchanged on Thursday, holding its nerve in
the face of uncomfortably low inflation though it could still
unleash other measures to pep up a fragile euro zone recovery.
Following are comments by ECB President Mario Draghi at a
post-meeting news conference.
ON IMPACT OF UKRAINE CRISIS
"We have not discussed scenarios of ... different impacts
that the crisis could have. So far we have seen a major impact
on the Russian economy and the Ukrainian economy and some
financial impact on some countries that are bordering that
"The growth impact on the Russian economy is severe.
However, it's very, very difficult to foresee what is going to
be the impact over a horizon of two, three years ... if the
crisis were to continue. For example, the impact on the energy
market, what could this be for Europe. If we look at the next
six months, the answer is going to be very mild. If we look in a
year and a half, it could be very serious. But it depends on so
many things ... and we frankly, we poor central bankers, don't
have enough information to give a reliable assessment of the
likely economic impact at such an early stage in the crisis."
MORE ACCOMMODATIVE MONETARY POLICY
"Monetary policy, even if we don't do anything in the
presence of an improvement of the economy, will become more and
more accommodative because real interest rates will go down."
ASKED ABOUT POLISH EURO ASPIRATIONS
"The euro is an island of stability ... To the extent that
countries feel threatened (by geopolitical events such as
Ukraine) ... this area looks certainly attractive. But I should
stop here because you are aware that the foreign policy and
geopolitical dimensions of these choices go well beyond the mind
of a humble central banker."
EMERGING MARKET IMPACT
"The impact of the situation of emerging market economies
upon the euro area so far has been muted ... if anything, there
have been flows into the euro area, which narrowed the spreads
of some of the stressed countries."
ISLAND OF STABILITY
"The euro is a island of stability. It has to go back to
being also an island of prosperity and job creation but
certainly it is an island of stability."
"If we look (at the situation in Ukraine) from a purely
technocratic viewpoint and we look at the amount of trade in
goods, services, and financial services and ... capital flows,
we have to say that the interconnections are not as important as
to suggest a strong contagion from that region.
"However, let me also add that this would be a limited way
to look at the situation because the geopolitical risks in the
area could quickly become substantial and generate developments
that are unforeseeable and potentially of great consequence."
GOVERNING COUNCIL DEBATE
"We had a broad discussion on changes in interest rates, as
well as other monetary policy instruments."
"A key point of the discussion is the attention that the
presence of slack in the economy received ... (that is) low
capacity utilization rates, output gap.
"It is fairly wide and according to any estimate at the
present juncture is estimated to close itself very slowly."
"The suspension of sterilisation of the SMP programme is one
of the instruments that is in our list but we didn't see any
development in the money markets that would lead to that
unwanted tightening of monetary conditions that would justify
the use of this instrument ...
"Let me also add that the benefits of such sterilisation are
relatively limited given the short maturity of the bonds
currently present in the SMP portfolio. So the injection of the
liquidity would really last only a relatively short time, less
than a year for sure."
"The exchange rate is not a policy target for us, but the
exchange rate is very important for growth and price stability
... we ask ourselves the question - how much has (the euro
level) counted for the low inflation that we see today? We come
up with the number - with a figure, which is roughly 0.4 ...
that is a significant statement on how the exchange rate might
influence our price stability objective."
REASONS FOR TODAY'S RATE DECISION
"We saw our baseline by and large confirmed. There is a
continuation of a modest recovery ... The news that has come out
since the last monetary policy meeting is also, I would say, by
and large on the positive side."
"Both upside and downside risks to the outlook for price
developments are seen as limited and are considered to be
broadly balanced over the medium term."
DOWNSIDE ECONOMIC RISKS
"Developments in global financial markets and in emerging
market economies, as well as geopolitical risks may have the
potential to affect economic conditions negatively."
DECISIVE ACTION IF REQUIRED
"We are monitoring developments on money markets closely and
are ready to consider all instruments available to us. Overall,
we remain firmly determined to maintain the high degree of
monetary accommodation and to take further decisive action if
"(The latest analyses) fully confirm our decision to
maintain an accommodative monetary policy stance for as long as
"We firmly reiterate our forward guidance. We continue to
expect the key ECB interest rates to remain at present or lower
levels for an extended period of time."
"The latest ECB staff macroeconomic projections now covering
the period up to the end of 2016 support earlier expectations of
a prolonged period of low inflation to be followed by a gradual
upward movement in HICP inflation rates towards levels closer to
"Inflation expectations for the euro area over the medium to
long term continue to be firmly anchored."
ECONOMIC RECOVERY ON TRACK
"Incoming information confirms that the moderate recovery of
the euro area economy is proceeding in line with our previous
(London MPG Desk +44 207 542 4441)