Excerpts from the introductory statement by Mario Draghi, President of the ECB, at the ECON committee of the European Parliament, Brussels, 9 July 2018:
Our confidence in the inflation path is also rising. First, the range of uncertainty around the inflation projections has narrowed. Second, underlying inflation has increased from the very low levels that prevailed in 2016 and is foreseen to rise as the economy continues to expand, capacity utilisation strengthens and labour markets further tighten.
Finally, on the third criterion, the projected path of inflation appears to be self-sustained, i.e. resilient to a gradual ending of net asset purchases.
On the basis of this assessment, the Governing Council concluded that progress towards a sustained adjustment has been substantial so far and should continue in the period ahead, although some uncertainties persist. We therefore anticipate that after September we will reduce our monthly net asset purchases from €30 billion to €15 billion and will end our net asset purchases at the end of December. This is subject to incoming data confirming our medium-term inflation outlook.
The expected end of the net asset purchases in December 2018 does not mean that our monetary policy ceases to be expansionary. Monetary policy will have to continue to accompany the economic expansion for some time. We have therefore reaffirmed our reinvestment policy and enhanced our forward guidance on the key interest rates.
We intend to maintain our policy of reinvesting the principal payments from maturing securities purchased under the APP for an extended period of time after the end of our net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. And we expect key ECB interest rates to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with our current expectations of a sustained adjustment path.
Our monetary policy measures have been very effective. We estimate that the measures we have taken since mid-2014 will have an overall cumulative impact of around 1.9 percentage points on both euro area real GDP growth and inflation for the period between 2016 and 2020.
Our measures are playing a decisive role in bringing inflation back on track to reach a level that is below, but close to, 2% over the medium term. However, we need to be patient, persistent and prudent in our policy to ensure that inflation remains on a sustained adjustment path.