by the harmonised index of consumer prices increased measurably at the beginning of this year, mostly due to temporary and technical factors. headline inflation is likely to increase in the coming months, but some volatility is expected throughout the year. due to weak demand and significant slack in labour and product markets, underlying price pressures remain subdued. our march staff projection exercise confirms that the medium - term inflation outlook remains below our inflation aim. 1 / 3 bis central bankers'speeches at its latest monetary policy meeting in march 2021, the governing council conducted a joint assessment of the inflation outlook and of the prevailing financing conditions, looking in particular at the recent increase in risk - free interest rates and sovereign bond yields. the governing council judged that, if left unchecked, this increase could cause a tightening of the wider set of financing conditions that we monitor, as banks use those rates as key reference points for determining credit conditions for households and firms. such a tightening would have been premature, given the still fragile state of our economy, and inconsistent with the ecb ’ s commitment to counter the downward impact of the pandemic on the projected path for inflation. as a result, we decided that purchases under the pandemic emergency purchase programme ( pepp ) over the next quarter would be conducted at a significantly higher pace than during the first quarter of this year. we also confirmed to conduct net asset purchases under the pepp with a total envelope of €1, 850 billion until at least the end of march 2022 and, in any case, until the governing council judges that the coronavirus crisis phase is over. at the same time, we continue to stand ready to adjust all our instruments as appropriate to ensure that inflation moves towards our aim in a sustained manner, in line with our commitment to symmetry. the impact of the covid - 19 pandemic on the european financial sector let me take this opportunity to discuss in more detail the impact of the pandemic on the financial sector – which is one of the key topics of the ecb annual report this year – and the challenges europe will face in the recovery phase. the spread of the covid - 19 pandemic during 2020 led to a sharp increase in financial stability vulnerabilities across markets and sectors. confronted with these challenges, governments deployed crucial measures to support firms and households. micro - and macroprudential authorities complemented these efforts3, sending a strong signal to banks that they should make use of their existing

uncertainties through policy coordination among countries at international forums including the g20. now then, what are the challenges facing the korean economy? the growth outlook for the korean economy this year is clouded by the existence of several downside risks, among them the political unrest in the middle east and north africa, and resultant rise in international oil prices, and domestically, the damage caused by foot - andmouth disease. on the other hand, there are also upside risks, such as the strengthening of the economic recoveries in the us and other major advanced economies. and as the effects of these downside and upside risks are likely to be of similar magnitude, we at the bank of korea expect the korean economy to achieve favorable growth at the originally - forecast level of around 4. 5 % this year, with balanced contributions from exports and domestic demand. employment has exhibited a trend of recovery since 2010, led by the private sector, with the unemployment rate holding steady at the mid - 3 % level, while a solid trend of surplus has been maintained in the current account, albeit at a declining ratio to gdp. for this year as well, we foresee outcomes similar to those of last year both in employment and in the current account balance. given such prospects, i believe price stability to thus now be the greatest challenge facing the korean economy. amid the build - up in demand pressures from our swift recovery from the global crisis and economic upswing, consumer price inflation, after recording 4. 1 % in january, marked 4. 5 % in february, exceeding the upper bound of the bank of korea ’ s medium - term inflation target. this is due mainly to three factors. first are the run - ups in oil and other international commodity prices, and the surge in prices of agricultural, livestock and fisheries products owing mostly to the abnormal cold wave experienced this winter and to the outbreak of footand - mouth disease. second is the demand - side pressure, as measured by the positive output gap. and the third factor is the rising inflation expectations. roughly speaking, the supply - side factors account for half of the price inflation that we are seeing. bis central bankers ’ speeches in the coming months, consumer price inflation may remain elevated at a high level for some time. having said that, i expect inflationary pressures to be concentrated more in the first half of this year than in the second half, and particularly those stemming from supply - side factors like international commodity prices to ease in the second half relative to the first. given