##ruency of their recommendations with those put forward by public authorities. second, enhancing transparency and valuation practices is crucial for restoring confidence in financial markets. progress has already been marked in this respect, as many financial institutions have improved disclosure in their interim financial reporting for the second quarter of 2008, especially in relation to their risk exposures, valuation methods and off - balance sheet entities. relevant guidance has been provided and is also being further developed by the basel committee on banking supervision and public sector initiatives, such as the european and the american securitisation fora. in addition, the international accounting standards board is accelerating its work to enhance accounting and disclosure standards of off - balance sheet entities and to develop guidance for valuation in markets that are no longer active. i take this opportunity to welcome the amendments adopted by the international accounting standards board and implemented in the eu by the european commission earlier this month. these amendments introduce the possibility to reclassify assets in line with what is already permitted by the us gaap and require additional disclosure requirements linked to these reclassifications in order to ensure full transparency. the ecb has been championing enhanced transparency and valuation practices as well as consistency at the international level and will continue following all relevant developments given the importance of accounting standards to financial stability. third, reviewing regulation on capital adequacy to assess the extent to which the current regulatory framework encourages procyclical behaviour by financial institutions is pivotal in promoting financial stability. in the short term, regulators have agreed to avoid measures that will in effect tighten capital requirements, impinging on the financial standing of banks and negatively impacting the supply of credit and the economy as a whole. at the same time, work has been initiated to investigate the impact of factors potentially contributing to procyclicality from a longer - term perspective. finally, i would like to discuss the measures aiming at enhancing the cooperation among central banks, supervisors and regulators in the current context. on the crisis prevention side, it has been agreed that there is a need to reinforce multilateral surveillance. to this end, the fsf and the imf will intensify their cooperation with a view to enhancing the assessment of financial stability risks on a global scale. in the eu context, the same is envisaged for the committee of european banking supervisors and the banking supervision committee of the european system of central banks. these initiatives should also be reflected at national level. to this end, strengthening cooperation and exchange of information between central banks and supervisory

lending to clients, to help to improve market liquidity in important segments of the private debt security market, and to ease funding conditions for banks and enterprises. today ’ s decisions take into account the expectation that price developments will continue to be dampened by the substantial past fall in commodity prices and the marked weakening of economic activity in the euro area and globally. the latest economic data and survey information suggest tentative signs of a stabilisation at very low levels, after a first quarter which was significantly weaker than expected. the world economy, including the euro area, is still undergoing a severe downturn, with the prospect of both external and domestic demand remaining very weak over 2009 before gradually recovering in the course of 2010. this assessment incorporates a number of adverse developments which are likely to materialise over the coming months, such as a further deterioration in labour markets. at the same time, available indicators of inflation expectations over the medium to longer term remain firmly anchored in line with the governing council ’ s aim of keeping inflation rates at levels below, but close to, 2 % over the medium term. the outcome of the monetary analysis confirms that inflationary pressure has been diminishing, as money and credit growth have further decelerated in recent months. against the background of these developments, after today ’ s decisions we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. let me now explain our assessment in some more detail, starting with the economic analysis. reflecting the impact of the financial market turmoil, economic activity continued to weaken in the euro area in the course of the first quarter of 2009, in parallel with the ongoing downturn in the world economy. this weakening in the first quarter appears to have been significantly more pronounced than projected in march. more recently, there have been some tentative signs in survey data of a stabilisation, albeit at very low levels. overall, economic activity is likely to be very weak for the remainder of this year, before gradually recovering in the course of 2010. in particular, the substantial fall in commodity prices since the summer of 2008 is supporting real disposable income and thus consumption. in addition, external as well as domestic demand should increasingly benefit from the effects of the significant macroeconomic stimulus under way as well as from the measures taken so far to restore the functioning of the financial system both inside and outside the euro area. taking all these measures and their effects into account, as well as the pronouncedly negative growth in