ECB Press Conference Bullet Points

• The euro area economy is currently experiencing an episode of weak activity characterized by high commodity prices weighing on consumer confidence and demand, as well as by dampened investment growth
• This episode will be followed by a gradual recovery
• Growth in the world economy is expected to remain resilient, benefiting from growth in emerging economies. This should support external demand for euro area
• The ECB today lowered its 2008 economic growth forecast to annual real GDP growth in a range between 1.1% and 1.7% in 2008, and between 0.6% and 1.8% in 2009. According to the staff’s forecast, inflation will not return to the bank’s target until 2010.
• Upside risks to price stability over the medium term, while downside risks prevail
• Risks stem particularly from renewed increases in energy and food prices, which could dampen consumption and investment
• Downside risks continue to relate to the potential for the financial market tensions
• Annual HICP inflation has remained considerably above the level consistent with price stability
• The worrying level of inflation is largely the result of both the direct and indirect effects of past surges in energy and food prices at the global level
• Wage growth has been picking up in recent quarters, at a time when labor productivity growth has decelerated
• Annual HICP inflation rate is likely to remain well above levels consistent with price stability, moderating during the course of 2009
• The higher inflation projections for 2008 and 2009 mainly reflect higher energy prices and, to a lesser extent, higher food and services prices than assumed previously
• There are upside risks to the outlook for price developments
• Upside risks include the possibility of renewed increases in commodity prices and of previous rises having further and stronger indirect effects on consumer prices
• Very strong concern that the emergence of broad-based second-round effects in price and wage-setting behavior could add significantly to inflationary pressures
• It is imperative to ensure that medium to longer-term inflation expectations remain firmly anchored
• The Governing Council is monitoring price-setting behavior and wage negotiations in the euro area with particular attention
• Monetary analysis confirms the prevailing upside risks to price stability
• Sustained underlying strength of monetary and credit expansion in the euro area over the past few years has created upside risks to price stability
• Growth of broad money supply and credit aggregates is showing some signs of moderation
• M3 growth overstated the underlying pace of monetary expansion
• The broad-based analysis confirms the underlying strength of money growth
• The availability of bank credit has, as yet, not been significantly affected by the ongoing financial tensions
• Loans to households continues to follow the downward trend observed over the past few years

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