Mario Draghi: ECB press conference – introductory statement Introductory statement by Mr Mario Draghi, President of the European Central Bank, and Mr Vítor Constâncio, Vice-President of the European Central Bank, Frankfurt am Main, 3 November 2011. *  *  *  Ladies and gentlemen, welcome to our press conference. Today is the first time that I have had the privilege and pleasure of chairing the meeting of the Governing Council of the ECB. I am delighted to proceed now with our well-established practice of real-time communication and to report on the outcome of our meeting, together with the Vice-President. Based on its regular economic and monetary analyses, the Governing Council decided to reduce the key ECB interest rates by 25 basis points. While inflation has remained elevated and is likely to stay above 2% for some months to come, inflation rates are expected to decline further in the course of 2012 to below 2%. At the same time, the underlying pace of monetary expansion continues to be moderate. After today’s decision, inflation should remain in line with price stability over the policy-relevant horizon. Owing to their unfavourable effects on financing conditions and confidence, the ongoing tensions in financial markets are likely to dampen the pace of economic growth in the euro area in the second half of this year and beyond. The economic outlook continues to be subject to particularly high uncertainty and intensified downside risks.
Such tools would allow participants to fine-tune the amount they want every day in response to changes in supply-and-demand conditions in the market and their cash management needs. In either the fixed-rate or fixed-quantity case, tools offering the ability to transact directly with either bank or non-bank counterparties would enhance the Desk’s operational capacity and strengthen the transmission of monetary policy in the face of some of the rates wedges currently seen in markets. I should note that the operations described above are all temporary liability management tools that don’t reduce the size of the Fed’s balance sheet; they shift one liability item – reserve balances – into another – a reverse repo with the New York Fed, for example.11 In recent years, the Federal Reserve has developed and tested several tools, including term and overnight reverse repos with an expanded set of counterparties and the Term Deposit Facility, or TDF, available to nearly all depository institutions, that together with IOER represent most of this broad toolkit.12 IOER and the TDF represent unsecured overnight and term tools, respectively, in which only depository institutions are eligible. I’ve already discussed IOER. The TDF is a program through which Federal Reserve Banks offer interest-bearing term deposits to eligible banks through an auction subscription that could be either fixed in quantity or fixed in rate with full allotment. An increase in term deposits outstanding temporarily reduces reserve balances because funds to pay for them are immobilized away from reserve accounts of participating institutions for the life of the term deposit.