Introductory statement to the press conference (with Q&A)
Mario Draghi, President of the ECB,
Vítor Constâncio, Vice-President of the ECB
Frankfurt am Main, 8 December 2016
Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by the Commission Vice-President, Mr Dombrovskis.
Based on our regular economic and monetary analyses, we today conducted a comprehensive assessment of the economic and inflation outlook and our monetary policy stance. As a result, the Governing Council took the following decisions in the pursuit of its price stability objective:
As regards non-standard monetary policy measures, we will continue to make purchases under the asset purchase programme (APP) at the current monthly pace of €80 billion until the end of March 2017. From April 2017, our net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. If, in the meantime, the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment of the path of inflation, the Governing Council intends to increase the programme in terms of size and/or duration. The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the APP.
To ensure the continued smooth implementation of the Eurosystem’s asset purchases, the Governing Council decided to adjust the parameters of the APP as of January 2017 as follows. First, the maturity range of the public sector purchase programme will be broadened by decreasing the minimum remaining maturity for eligible securities from two years to one year. Second, purchases of securities under the APP with a yield to maturity below the interest rate on the ECB’s deposit facility will be permitted to the extent necessary.
The key ECB interest rates were kept unchanged and we continue to expect them to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases.
Today’s extension of the asset purchase programme has been calibrated to preserve the very substantial degree of monetary accommodation necessary to secure a sustained convergence of inflation rates towards levels below, but close to, 2% over the medium term. Together with the sizeable volume of past purchases and forthcoming reinvestments, it ensures that financial conditions in the euro area will remain very favourable, which continues to be crucial to achieve our objective. In particular, the extension of our purchases over a longer horizon allows for a more sustained market presence and, therefore, a more lasting transmission of our stimulus measures. This calibration reflects the moderate but firming recovery of the euro area economy and still subdued underlying inflationary pressures. The Governing Council will closely monitor the evolution of the outlook for price stability and, if warranted to achieve its objective, will act by using all the instruments available within its mandate.
Let me now explain our assessment in greater detail, starting with the economic analysis. Real GDP in the euro area increased by 0.3%, quarter on quarter, in the third quarter of 2016, following similar growth in the second quarter. Incoming data, notably survey results, point to a continuation of the growth trend in the fourth quarter of 2016. Looking further ahead, we expect the economic expansion to proceed at a moderate but firming pace. The pass-through of our monetary policy measures to the real economy is supporting domestic demand and has facilitated deleveraging. Improvements in corporate profitability and very favourable financing conditions continue to promote a recovery in investment. Moreover, sustained employment gains, which are also benefiting from past structural reforms, provide support for households’ real disposable income and private consumption. At the same time, there are indications of a somewhat stronger global recovery. However, economic growth in the euro area is expected to be dampened by a sluggish pace of implementation of structural reforms and remaining balance sheet adjustments in a number of sectors.
This assessment is broadly reflected in the December 2016 Eurosystem staff macroeconomic projections for the euro area, which foresee annual real GDP increasing by 1.7% in 2016 and 2017, and by 1.6% in 2018 and 2019. Compared with the September 2016 ECB staff macroeconomic projections, the outlook for real GDP growth is broadly unchanged. The risks surrounding the euro area growth outlook remain tilted to the downside.
According to Eurostat’s flash estimate, euro area annual HICP inflation in November 2016 was 0.6%, up further from 0.5% in October and 0.4% in September. This reflected to a large extent an increase in annual energy inflation, while there are no signs yet of a convincing upward trend in underlying inflation. Looking ahead, on the basis of current oil futures prices, headline inflation rates are likely to pick up significantly further at the turn of the year, mainly owing to base effects in the annual rate of change of energy prices. Supported by our monetary policy measures, the expected economic recovery and the corresponding gradual absorption of slack, inflation rates should increase further in 2018 and 2019.
This pattern is also reflected in the December 2016 Eurosystem staff macroeconomic projections for the euro area, which foresee annual HICP inflation at 0.2% in 2016, 1.3% in 2017, 1.5% in 2018 and 1.7% in 2019. By comparison with the September 2016 ECB staff macroeconomic projections, the outlook for headline HICP inflation is broadly unchanged.
Turning to the monetary analysis, broad money (M3) growth moderated in October 2016, with its annual rate of growth decreasing to 4.4%, after 5.1% in September. As in previous months, annual growth in M3 was mainly supported by its most liquid components, with the narrow monetary aggregate M1 expanding at an annual rate of 7.9% in October, after 8.4% in September.
Loan dynamics followed the path of gradual recovery observed since the beginning of 2014. The annual rate of change of loans to non-financial corporations increased to 2.1% in October 2016, from 2.0% in the previous month. The annual growth rate of loans to households remained at 1.8%. Although developments in bank credit continue to reflect the lagged relationship with the business cycle, credit risk and the ongoing adjustment of financial and non-financial sector balance sheets, the monetary policy measures put in place since June 2014 are significantly supporting borrowing conditions for firms and households and thereby credit flows across the euro area.
To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need to take today’s monetary policy decisions so as to preserve the very substantial amount of monetary support that is necessary in order to secure a return of inflation rates towards levels that are below, but close to, 2% without undue delay.
Monetary policy is focused on maintaining price stability over the medium term and its accommodative stance supports economic activity. As emphasised repeatedly by the Governing Council, in order to reap the full benefits from our monetary policy measures, other policy areas must contribute much more decisively, both at the national and at the European level. The implementation of structural reforms in particular needs to be substantially stepped up to reduce structural unemployment and boost potential output growth in the euro area. Structural reforms are necessary in all euro area countries. The focus should be on actions to raise productivity and improve the business environment, including the provision of an adequate public infrastructure, which are vital to increase investment and boost job creation. The enhancement of current investment initiatives, progress on the capital markets union and reforms that will improve the resolution of non-performing loans will also contribute positively to this objective. In an environment of accommodative monetary policy, the swift and effective implementation of structural reforms will also make the euro area more resilient to global shocks. Fiscal policies should also support the economic recovery, while remaining in compliance with the fiscal rules of the European Union. Full and consistent implementation of the Stability and Growth Pact over time and across countries remains crucial to ensure confidence in the fiscal framework. At the same time, it is essential that all countries intensify efforts towards achieving a more growth-friendly composition of fiscal policies.
We are now at your disposal for questions.* * *
Question: Two questions, please. Could you tell us if any other options were presented in today's meeting, and if so what they were?
And could you tell us please as well whether the decision today on the QE extension and the changes to the design were unanimous?
Draghi: Yes, the two options that have been presented were the ones that had been studied by the committees in the preceding months. One foresaw the option of continuing with €80 billion a month for six months, and the other one is the one that received a very, very broad consensus by the Governing Council.
Question: When you decided to buy bonds with a maturity of less than two years, how do you plan to deal with criticism that that sees the ECB getting involved with governments' short-term financing needs?
The other question regards buying below the deposit rate. In the minutes, the chief economist, I think, said that any change would have to make economic sense. So what's the economic benefit of buying bonds that yield less than 40 basis points below zero?
Draghi: First of all, let me say what I said during the introductory statement, but it does need some emphasis: the purchase of securities under the asset purchase programme with a yield to maturity below the interest rate on the ECB deposit facility will be permitted to the extent necessary. So it's an option; it's not a necessity. As a matter of fact, the relevant committees will look in January and in the coming months when this could become a necessity. So it's more to give sort of an option for continuing the smooth implementation of the programme than for any other reason. Now, about the general involvement of the ECB with the financing needs of the governments: frankly, there isn't any difference here. We operate on a secondary market as well. Nothing changes. We've changed the maturity but nothing else.
Question: First of all a question on the reduction of the pace of purchases from €80 billion to €60 billion per month. Could you tell us why you felt it necessary to ensure this second option, this more sustained market presence? What was the rationale for this decision?
The second one is, as you just said, to the extent necessary it will be possible to purchase below the deposit rate. The fact that the committees still have to study this, does it mean that this is not immediately an option? And what may be the conditions to make it necessary? Are there going to be caveats? Are there going to be some sort of limitations in doing that? What sort of instructions will you give to the committees?
Draghi: On your first question, first let me say that we have to go back to March 2016, when we up-sized our programme from €60 billion to €80 billion. At that time the outlook for a sustained return to our inflation objective was much darker, and deflation risks were not immaterial at that time. So at this point in time, we basically judge that the outlook, for the sustained return to our inflation objective, is not very different from what it was at the beginning of the programme when it was scaled to €60 billion. And more specifically the risk of deflation has largely disappeared. However, uncertainty prevails. Uncertainty prevails everywhere, and we'll certainly see and assess the progress of the overall situation at the end of 2017.
But since uncertainty prevails everywhere, that's the reason for this sentence in the introductory statement that says, "If, in the meantime, the outlook becomes less favourable, or if financing conditions become inconsistent with further progress towards a sustained adjustment of the path of inflation, the Governing Council intends to increase the programme in terms of size and/or duration.” Now, this means two things. First of all, the Governing Council is acting in a pragmatic and flexible way to cope with risks that may materialise in this period of time. Second, there is no question about tapering. Tapering has not been discussed today.
Now, on the second point, I have to refer to the committees' work on that point. As I said, this is an option, not a necessity, and the committees will assess when and if it should become so. As you know, the amounts of purchases and the maturities of purchases do depend on the current constellation of rates, and as this changes so it changes the necessity to buy certain maturities rather than others.
Question: You said tapering hasn't been discussed today. How much longer do you think it'll be until that discussion needs to be had in the Governing Council? How much pressure is there to hold that discussion on a possible exit?
My second question is on Italy. There was obviously the no vote this weekend. How vulnerable is the country and its banking sector to a slow-down, to a removal of the ECB stimulus measures, in your view?
Draghi: On your first question, in a sense the intention, the underlying narrative of our monetary policy decisions was exactly to maintain the extraordinary degree of monetary accommodation that we have in place. And to this extent, without distorting prices, we'll certainly continue to exert pressure on market prices, to deliver exactly the degree of monetary accommodation that we want. The second purpose is to transmit a sense that the presence of the ECB on the markets will be there for a long time. So a sustained presence is also the message of today's decision, and that's why tapering was not discussed.
On your second question, you asked me about vulnerability. I think that the vulnerabilities that both the banking system and Italy have have been there for a long time, and so they ought to be coped with. I'm confident that the government knows what to do and they will be dealt with.
Question: You've underlined that the ECB can increase the volumes and duration of the programme if developments change. Does that also mean, by contrast, if developments are better than expected, the ECB could slow purchases or cut the duration of the programme? And if not, why not, given that the ECB always says that it's a data-driven institution?
Draghi: We haven't discussed that at all today. We seem to be fairly far away from any such high-class problem.
Question: I wonder if I could go back to the word "tapering" again; although you said that's not discussed, the markets are certainly taking it otherwise and the analysts are using the word "tapering". Maybe you could explain to us what's the difference between what you did today and what people generally consider to be tapering.
Draghi: Well, the word has several meanings depending on who is using it, but the natural way to look at a word like that is to have a policy whereby purchases would gradually go to zero. And that's not been discussed. As a matter of fact, it's not even been on the table.
Question: This is again about Italian banks. We know that today the supervision board is meeting and probably it won't be able to avoid discussing the situation of Italian banks. So my question is, in your view do you think Italian banks could be facilitated in facing their problems by being given more time right now, or do you think the urgency of the matter is such that it must be dealt with very quickly?
Draghi: You know that on the basis of the so-called separation principle, I have to answer your question by saying: ask the Supervisory Board for an answer.
Question: Two questions. The first one, another option to safeguard the smooth functioning of the QE programme would have been to raise the issue and issuer limits. What was the reason not to do so?
The other one, very simple: the 1.7% in 2019, is that in line with below but close to 2%?
Draghi: The answer to the second question is not really. So we have to persist, and we know that there is gradual convergence to that objective. So that's the answer to the second question.
The answer to the first question is that actually, as you know, the committees looked at that as well, and there was an increasing awareness of the legal and institutional constraints that would make such a change difficult, and that's why the removal of the so-called DFR [Deposit Facility Rate] floor was preferred.
Question: Two questions. Maybe can you quantify how much inflation and growth will benefit in the eurozone given the decisions of today? In other words, how much QE is embedded in these new projections? Can you say this for the coming years?
The second question: inflation Is expected to be well above zero in the coming years, and by the same time ECB key interest rate will remain at zero, so we will have the situation of real interest rates well in negative, and that will be maybe difficult to explain and will trigger a lot more criticism, in this country especially. How will you go along with this situation?
Draghi: On your first question, I don't have the estimates that embody today's decisions in measuring, in sizing the impact on GDP growth and inflation. We have the impact of the past decisions, which account for a cumulative 1.3 pp. growth over a three-year horizon and 1.5 pp. inflation over a three-year horizon.
On your second question, certainly if inflation expectations continue their recovery, it will mean falling real rates, which, on one hand, will certainly have a powerful stimulative effect on the economy, and, on the other hand, will also have an impact on the real return on savings. So we will assess the situation in the coming months and we'll see what is the net balance of all these different effects. This is the situation; in a sense it's a situation that shows an improvement overall. But I should also say that in the meantime also yields on bonds are going up, and so it's not at all clear that in the end the real return on savings is actually going down. We have to see what happens on the nominal rate and the expectations of inflation.
Question: My first question is on the Trump effect, actually. After the US election, interest rates in the US have gone up considerably and the dollar has appreciated against the euro. What does that mean for the ECB's monetary policy? Do you see the risk of abrupt interest rate increases and spill-overs to the eurozone?
My second question is on the legal questions. Mr Mersch has recently said that the European Court of Justice has confirmed the legality of the ECB's monetary measures, provided that the self-imposed boundaries are observed. Now you change some of the self-imposed boundaries, are you not fearing that this would again raise legal issues?
Draghi: The answer to the second question is no, because the self-imposed boundaries to which Mr Mersch was referring are not the self-imposed boundary which we have removed today. So different things.
The answer to the first question is that it's very difficult to assess what are the effects of these big changes, like the radically new administration - new in the way it looks at the world - in the United States, or for that matter even Brexit, or for that matter even the outcome of the Italian referendum a few days ago. All three events were expected to have major effects in the world, and in all three cases, the markets, the financial intermediaries, proved much more resilient than people had expected them to be. So first of all, we know one thing: markets were more resilient, and this has probably many reasons, many causes, one of which is certainly the good work that regulators have done in the last seven, eight years to strengthen the intermediaries and the markets. But there are also other good reasons: an overall better macroeconomic policy context. But the point is that all these events – especially Brexit and the new administration in the United States – have effects that are, by their very nature, going to develop their full dimensions in the medium to long term. So we'll certainly see consequences of these changes in the medium to long term – not necessarily, as I was saying, in the short term. But these consequences are very, very difficult to assess now. So it's very difficult to assess what is the medium-/long-term consequence of a possible – possible – change in the US administration economic policy. But I should stress the possible, because we are still at a very early stage.
Question: You've alluded in the last answer, and also last week in an interview, to the fact that political uncertainty is high. You actually defined it dominant. After the Italian referendum, is this concern heightened for you? I'm thinking particularly of the need, which you stress repeatedly, of reforms: the country certainly needs reforms, and it's possible, it's probable that they will not be forthcoming in a country without a government and with possible elections in the next few months.
Draghi: When I referred to dominant political uncertainty, I was not saying something extravagant or difficult or unforeseen: just look at the election calendar for the year to come. So that is by itself a source of uncertainty. Look at the rest of the world. Look at what's happening with the emerging market economies; look at what's happening also in some segments of the financial markets. So there is a big uncertainty, much of which is political, and whether we can do something about that or not is an open question. I think what the central banks can do is to keep a steady hand, namely to continue with the monetary accommodation that is necessary to achieve their objective. Having said that, countries that need reforms have to undertake them regardless of what is the general political uncertainty, because the best way for countries to cope with this uncertainty is actually to restore growth and employment and job creation.
Question: You said that the Governing Council can increase the programme again in terms of size and duration, if conditions would make that necessary. Does that mean that the monthly amount can again be raised from €60 billion to €80 billion?
A second question if I may on the removal of the deposit rate floor. Critics say that this basically means, for the national central banks that do the purchases, that they immediately incur an interest rate loss. Do you share that assessment?
Draghi: The answer to the first question is yes. Yes, certainly, it can increase; it can even go back to €80 billion. As a matter of fact, this number was quoted, so it's a range of options, and we will see. But the key message underlying this sentence, "if, in the meantime, the outlook becomes less favourable,…" the key message is to show that there is no tapering in sight. To show that the ECB is going to stay in the markets, to show that it will continue to exert pressure on market prices, though we don't want to distort them, of course. But that's the meaning of that.
The second point is yes, indeed, there is going to be a loss, but our mandate is to pursue price stability. It's not to maximise central banks' profits.
Question: The Eurogroup has said clearly no to the plan of the European Commission of a stimulus of 0.5% of GDP. Do you have the feeling that you are going in one direction, which is a stimulus, because of this uncertainty as you have described it, and the ministers are choosing exactly the opposite direction, which is no stimulus on the fiscal side?
Draghi: Concerning this, the fiscal aspect, what we've said on and on, really, is that indeed other policies, one of which is fiscal policy, should also complement the action of the monetary policy in order to reap its full effects. But we also put emphasis all the time on the composition of the budget, in the sense of making it more growth-friendly, which basically means lower taxes, lower current government expenditures, higher investment expenditure targeted to productivity-enhancing investments. As far as the size is concerned, it really depends on whether the countries have fiscal space or not, and we always stress the fact that fiscal policy should respect the Stability and Growth Pact. And we always use the wording: it's the anchor of stability or credibility in the euro area. And the reason for this is that, if you look, well designed rules, if they are complied with, are essential for two reasons. They give credibility to the governments that comply with these rules, and even perhaps more importantly, they increase trust between governments.
And why is it so important that this trust is there? It's very important because when we talk about further steps towards deeper integration in our monetary union, these further steps are based on trust, and these further steps are necessary to complete our monetary union. We can do so, and therefore make our union stronger, only if there is trust between governments.
Question: You hinted at the terrible calendar of 2017, many elections, and we still don't know what will happen in Italy, what government there will come. The situation of the banks is very difficult. Do you think there are still some risks for the euro in the next months and next year?
The second question is, how would you respond to people from some countries that say that you are in some way biased, that you are helping especially the countries in southern Europe, including Italy, with the QE and now the extension of QE?
Draghi: Well, the answer to the second question is no, of course, I'm not biased, and I think we've given plenty of evidence that the policy of the ECB - first of all, it's decided by the Governing Council. And we are there not as representatives of our countries - me less than everybody else, of course - but also we are there in our personal capacity, and our mandate is not to ensure some sort of national objective, but to ensure the price stability objective for the whole of the euro area, and that's what we have done. Incidentally, our policies are not very different from the policies that are being put in place by all the large central banks in the world. We are no exception.
No, at this point in time frankly we don't see risk for the euro area. Different countries have different vulnerabilities. As I was saying before, the broader macroeconomic context is better than it was five years ago when we had contagion, but also financial markets and financial intermediaries are stronger. So these problems, though very important, though very urgent - and therefore they should be addressed with effectiveness and speed - remain contained within the individual countries. Now, having said that, since I mentioned before that trust is one condition for our union to proceed, to progress towards a more complete, as one would say more perfect, monetary union, there's another condition that's also essential, and that's convergence. Countries need to converge, and in order to converge they have to undertake these structural reforms that would enhance convergence. And some of these reforms in some countries, each country has its own agenda for these reforms. The fact that structural reforms and convergence are being pursued in various countries is important, not necessarily because it causes risks for the euro but because it strengthens our monetary union.
Question: How do you counter the argument that the ECB intervention in monetary policy has in some way stifled reform momentum in the eurozone?
Draghi: We've been discussing this for, now, a long time. Our view is different. Our view is actually that easing monetary conditions should help undertaking reforms. There are several reasons for this. First of all, the structural reforms that have been undertaken in the euro area after the sovereign crisis were actually undertaken when interest rates were low, had already been low for a while. Second, we should ask ourselves what sort of structural reforms are in a sense related to the level of interest rates prevailing in the markets? There are certainly some reforms that are related. The reforms that have to do mostly with budgetary needs. Take the pension reform: it's quite clear that if market conditions are overstressed and countries have or are about to lose market access, unless they make their debt profile sustainable, in that case the level of interest rates certainly produces a pressure to change, to reform in the direction of making debt more sustainable.
But there are many other structural reforms equally if not more important in the long run, like reform of the educational system, reform of the judiciary, the reform of the electoral system - take the case of Italy - the reform of the constitution, that have nothing to do with the level of interest rates. So even logically there isn't such a tight link with the level of interest rates. Also we have internal research, as a matter of fact, that shows that there is no such link between the level of interest rates and therefore the degree of accommodation of our monetary policy and the willingness of governments to undertake the needed structural reforms.
Question: Among the options that the Italian government is studying to solve the problem of the banking system, there is a European loan from the ESM. Can you tell us in general if you think this could be a good solution to solve those problems all at once?
Draghi: I must confess I know very, very little about this ESM loan to Italy for the banking system. Let me just give you Article number 3 of the ESM. It says, "The following criteria and hierarchy of prior actions shall be met in order for a request for financial assistance for the purpose of recapitalising financial institutions to be considered eligible: the beneficiary should demonstrate the existence of a lack of alternatives for recapitalising the financial institutions concerned. This should first reveal an inability to meet capital shortfalls via private-sector solutions, and secondly an inability of the beneficiary ESM member to recapitalise said institutions without incurring very adverse effects on its own financial stability and fiscal sustainability. Second, the financial institutions concerned should have a systemic relevance or pose serious threat to the financial stability of the euro area as a whole, and the beneficiary ESM member shall demonstrate its ability to reimburse the loan granted," and so on. I don't want to read the whole thing. It basically shows that it's a rather complex thing, and it shows also that I know very little about that. I'm sorry.
Question: I also have to refer to a speech your colleague Mr Mersch gave in Frankfurt some weeks ago, in which he hinted that the possibility of tapering may be at least discussed in today's Governing Council meeting. Now you say that it was not on the agenda and the new measurements have not to be interpreted in such a way. Could you tell us, please, how we have to interpret these different signals coming out of your institution?
Draghi: I'll tell you what happened today: it was not discussed.
Question: You said that tapering was not discussed, it's not on the table. Does this mean that not one member of the Council expressed his opinion as being in favour of tapering?
Question: Again coming to the two options that were presented at the meeting, one is six months with €80 billion and the other nine months with €60 billion. What were the arguments in favour of the second option? Why is it better to reduce the amount and run the programme longer?
Draghi: To some extent I've dwelt on these arguments before. We went back to when we increased the size in March, and we asked ourselves what were the conditions of the economy at that time, what were the prospects of a sustained return to our objective of inflation, what were the risks of potential deflation. And at that time we thought that raising to €80 billion would have been an answer to the concerns that we shared, that the Governing Council had at that time. So in deciding the new scale, the new size of €60 billion, we simply went back. We just went through the same analysis, an account of which I've given, in a sense, during the introductory statement in various parts of it. And we also saw that the risks of deflation, the inflation distribution are much more skewed towards out of deflation. So that was the reason.
The second reason is the length of time, and that's where we wanted to assure a sustained presence in the economy, in the markets. We want to assure that the ECB will continue to exert pressures on market prices, though as I said we don't want to distort them, and we want to assure that a reduction in size doesn't mean at all, as I said before, any tapering. So that's the logic behind the choice of €60 billion. But as I say, the programme remains flexible, and the flexibility is stated by the sentence that I read before, starting: If in the meantime, the outlook becomes less favourable, ….
Question: Looking to the future, what do you read into the rising price of oil? Is it important only as a statistical element, or do you think it can have structural importance for inflation?
Draghi: Well, it's an important change after many years that oil prices had gone down to, I believe, an unprecedented extent; now they're rising again, and the explanations are, in a sense, symmetric to what were the explanations for their downfall. Namely, better demand conditions, better supply conditions, and to some extent, I think a significant extent, the reestablishment of some international agreements. There is no question that these higher prices will feed into higher headline inflation, though we have to see how this is going to be - and it's exactly the same considerations, I remember, as I was doing in the other direction two or three years ago - we have to see to what extent this is a one-off effect, to what extent it will have secondary effects, and to what extent this will affect inflation excluding energy which we are not seeing yet any effect of on it. As I said there is no sign of convincing upward trend in the underlying inflation.
Question: Two questions for you. Why haven't you opted for a QE extension without an end date, if you want to show continued presence in the market? Was that a compromise among Governing Council Members?
Second question is, another point was the scarcity of assets, not only for your programme but also for the markets themselves, for the repo market, for example: are you confident that with the reduced amount of purchases now per month, those tensions in these markets like the repo market are lessened now? And I was hearing that you're also quizzing market participants about potentially creating mortgage-backed securities that could get a higher rating through the correlation effect, and by that getting rid of the safe asset problem.
Draghi: On your first question, as a matter of fact our programme says it goes until the end of December 2017 or beyond if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. So it is in a sense open-ended. It's state-contingent, we would say, rather than open-ended.
On the repo market, as you know, we've taken important decisions on the securities lending programme, and we decided that cash will be accepted as collateral for the PSPP securities lending programme, up to the limit of €50 billion. And details as far as this is concerned will be announced at 3:30 p.m. today. As far the repo market is concerned, we are aware of the ongoing developments in the euro area repo market. We will continue monitoring the developments, but the PSPP securities lending framework is sufficiently robust to ensure a continued smooth functioning of the repo markets. So we are aware that our purchase programme has contributed, among other relevant factors, to increase the repo rates used to obtain collateral of the best credit quality. But despite these price increases, repo market volumes continue to signal functioning repo markets and price discovery. So while we don’t have any indication that higher prices for some specific types of collateral are hampering the transmission of our monetary policy, we have nevertheless discussed what the ECB could do, and I just announced one of the things that will be detailed in the 3:30 p.m. announcement. We've decided also to enhance our securities lending programme.