BRATISLAVA (Reuters) - The European Central Bank cut interest rates for the first time in 10 months on Thursday, driven to act by an economy wallowing in recession and freed to do so by sharply falling inflation.
Following are comments by ECB President Mario Draghi at a post-meeting news conference.
ASKED ABOUT DEPOSIT RATE CUTS
"On the deposit facility rate, we said it in the past - we are technically ready. There are several unintended consequences that may stem from this measure. We will address and cope with these consequences if we decide to act. And we will again look at this with an open mind and we stand ready to act if needed."
ASKED IF ECB WOULD CUT RATES FURTHER:
"We would certainly look at all the incoming data ... As I said last time, we stand ready to act."
ON GROWTH VS AUSTERITY DEBATE
"Let us not forget how the crisis started ... don't unravel the progress you have achieved."
ECONOMIC RECOVERY IN SECOND HALF
"Looking ahead euro zone export growth should benefit from recovering global demand and our monetary policy stance should continue to support domestic demand. Furthermore the improvement in financial markets since last summer should work their way through to the real economy.
"At the same time, necessary balance sheet adjustments in the public and private sectors will continue to weigh on economic activity. Overall euro area economic activity should stabilise and recover gradually in the second half of the year."
BANK SUPERVISION
"The future single (banks) supervisory mechanism and single resolution mechanism are crucial elements to reintegrating the banking system ... and require swift implementation."
ABS PROGRAM
"The Governing Council decided to start consultations with other European institutions on initiatives to promote a functioning market for asset-backed securities collateralised by loans to non-financial corporations."
MONETARY POLICY
"Monetary policy stance will remain accommodative for as long as needed ...
"We will monitor very closely all incoming information ... and assess any impact on the outlook for price stability."
ECONOMIC OUTLOOK
"Overall labour market conditions remain weak ... weak economic sentiment has extended into the spring of this year. The cut in interest rates should contribute to support a recovery later in the year."
"Euro area export growth should benefit from a recovery in global demand ... the improvements in financial markets since last summer should work their way through to the real economy ... euro are economic activity should stabilise and recover gradually in the second half of the year. The risks ... continued to be on the downside."
RATE CUT MORE EFFECTIVE NOW
"You cannot say that monetary policy hasn't been accommodative. We look at the data, we monitor closely and we stand ready to act when needed.
"We have also had an increase in evidence that this action now through standard monetary policy would be more effective than it would have been a few months ago."
ON MERKEL COMMENT, ONE RATE FOR 17 COUNTRIES
Referring to German Chancellor Angela Merkel's recent comment that ECB would have to raise rates if it were looking at Germany alone, Draghi said:
"ECB independence is dear to all, and especially, I would say, to German citizens ... I think too much was made of that comment. The comment, really, if you take it literally, meant to say 'Look, we have a different situation here in the euro area. We have 17 countries, and the business cycle of these 17 countries is not exactly the same. They are not completely synchronous.'
"Actually, they are not synchronous and they differ very much across the euro area. So the monetary policy measures which can benefit in some may not benefit in others."
MONETARY POLICY CAN'T FIX ALL PROBLEMS
"Many of the problems that we see today in competitiveness in the labour market in the tax area don't have anything to do with monetary policy, neither can they be fixed with monetary policy. They can be fixed only by changing what is wrong in these three areas at least."
EASING FINANCING CONDITIONS
"Target 2 balances have decreased. When Target 2 balances decrease, that's the best sign we have that you have a return of confidence..."
"The 10-year sovereign bond yields went down for the stressed countries by more than 200-300 basis points..."
"These are measures that by themselves describe a very significant easing in the financial conditions."
RATE CUT CONSENSUS?
"In the Governing Council) there was a very strong prevailing consensus toward an interest rate cut. Within that there was prevailing consensus toward a cut of 25 basis points."
BANK LENDING
"To a large extent weak loan dynamics reflect the current stage of the business cycle, heightened credit risk and the ongoing adjustment of financial and non-financial sector balance sheets. The recent bank lending survey confirmed weak demand for loans in the euro area."
"In order to assure adequate transmission of euro zone monetary policy to the financing conditions in euro area economies it is essential that the fragmentation of euro area credit markets continues to decline further and that the resilience of banks continues to improve.
"There can't be fears of lack of funding as an excuse for not lending."
REFINANCING OPERATIONS
"We are closely monitoring money market conditions. In this context we decided today to continue conducting the main refinancing operations as fixed rate tender procedures with full allotment for as long as necessary and at least until the end of the sixth maintenance period of 2014 on 8th July."
INFLATION
"Inflation expectations in the euro area continue to be firmly anchored.
RATE CUT
"These decisions are consistent with low underlying price pressure in the medium term."
"The weak developments on the real side of the economy and on the monetary and credit side granted action by the ECB."
(London Desk +44 207 542 2945)
