European Central Bank (ECB) Press conference July 2016

Mario Draghi, ECB President

Financial markets were resilient post-Brexit with help from central banks

“Following the UK referendum on EU membership, our assessment is that euro area financial markets have weathered the spike in uncertainty and volatility with encouraging resilience. The announced readiness of central banks to provide liquidity, if needed, and our accommodative monetary policy measures, as well as a robust regulatory and supervisory framework, have all helped to keep market stress contained.

The intention is to meet policy objectives by all instruments necessary

“Governing Council continues to monitor economic and financial conditions very closely and safeguard pass-through of monetary policy…If warranted to achieve its objective, the Governing Council will act by using all the instruments available within its mandate.”

Sluggish growth in the Euro area in Q2 2016 expected to persist in the near term

“Euro area real GDP increased by 0.6%, quarter on quarter, in the first quarter of 2016, after 0.4% in the last quarter of 2015. Growth continues to be supported by domestic demand, while export growth has remained modest. Incoming data point to ongoing growth in the second quarter of 2016, though at a lower rate than in the first quarter. Looking ahead, we continue to expect the economic recovery to proceed at a moderate pace.”

Significant headwinds inform a negative growth outlook

“headwinds to the economic recovery in the euro area include the outcome of the UK referendum and other geopolitical uncertainties, subdued growth prospects in emerging markets, the necessary balance sheet adjustments in a number of sectors and a sluggish pace of implementation of structural reforms. Against this background, the risks to the euro area growth outlook remain tilted to the downside.”

To generate optimal results, monetary policy needs to be augmented by structural reforms and fiscal policy

“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 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….Fiscal policies should also support the economic recovery, while remaining in compliance with the fiscal rules of the European Union.”