policy stance, improving financing conditions and the progress made in fiscal consolidation and structural reform. in addition, real incomes are supported by lower energy prices. economic activity is also expected to benefit from a gradual strengthening of demand for euro area exports. at the same time, although unemployment in the euro area is stabilising, it remains high, and the necessary balance sheet adjustments in the public and private sectors will continue to weigh on the pace of the economic recovery. this assessment is also broadly reflected in the march 2014 ecb staff macroeconomic projections for the euro area, which foresee annual real gdp increasing by 1. 2 % in 2014, 1. 5 % in 2015 and 1. 8 % in 2016. compared with the december 2013 eurosystem staff macroeconomic projections, the projection for real gdp growth for 2014 has been revised slightly upwards. the risks surrounding the economic outlook for the euro area continue to be on the downside. developments in global financial markets and in emerging market economies, as well as geopolitical risks, may have the potential to affect economic conditions negatively. bis central bankers ’ speeches other downside risks include weaker than expected domestic demand and export growth and insufficient implementation of structural reforms in euro area countries. according to eurostat ’ s flash estimate, euro area annual hicp inflation was 0. 8 % in february 2014, unchanged from the ( upwardly revised ) outcome for january. while energy prices fell more strongly in february than in the previous month, increases in industrial goods and services prices were higher than in january. on the basis of current information and prevailing futures prices for energy, annual hicp inflation rates are expected to remain at around current levels in the coming months. thereafter, inflation rates should gradually increase and reach levels closer to 2 %, in line with inflation expectations for the euro area over the medium to long term. this assessment is also broadly reflected in the march 2014 ecb staff macroeconomic projections for the euro area, which foresee annual hicp inflation at 1. 0 % in 2014, 1. 3 % in 2015 and 1. 5 % in 2016. in the last quarter of 2016, annual hicp inflation is projected to be 1. 7 %. in comparison with the december 2013 eurosystem staff macroeconomic projections, the projection for inflation for 2014 has been revised slightly downwards. in view of the first publication of a three - year projection horizon in the march 2014 ecb staff macroeconomic projections, it should be stressed that the projections are conditional on a

already last year, the recovery is likely to be uneven across regions and sections and over time. high uncertainty continues to prevail. as regards price developments, we have continued to witness low inflation and low inflationary pressures over the recent months. inflation in february 2010 stood at 0. 9 %. the outlook for inflation remains in line with price stability and risks to this outlook remain broadly balanced. specifically, we expect inflation to stay around 1 % in the near term, and to remain moderate over the policy - relevant horizon, in line with a relatively slow recovery in demand. our monetary analysis continues to confirm the expectation of low inflationary pressures over the medium term, as reflected in weak expansion of money and credit. the growth of loans to enterprises in particular is anticipated to remain weak for some time ahead, while the annual growth rate of loans to households is positive and strengthening. these developments are still in line with regularities over past business cycles. we will monitor credit developments very closely in the months to come. while there is no clear evidence of credit constraints in the euro area as a whole, the situation differs across countries, sectors and company sizes. to a large extent, the weak growth of loans is due to the unprecedented severance of the 2009 recession. indicators of inflation expectations over the medium to longer term remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2 % over the medium term. it is against this background that the governing council kept the level of key ecb interest rates unchanged earlier this month, regarding the current level as appropriate. the significant monetary impulse stemming from our interest rate reductions last year has spread to market interest rates, and the transmission to rates charged by banks to households and corporations has continued to perform well. this transmission needs to be seen in conjunction with the non - standard measures that the ecb has taken. these measures, notably the provision of full allotment of liquidity to banks with a one - year maturity against collateral, have been effective in providing funding to banks at favourable conditions, stabilising the money market, and fostering the pass - through of our interest rate reductions. phasing out from non - standard measures in line with the above economic and monetary assessment, the governing council decided earlier this month to continue the gradual phasing out of some of the extraordinary measures. we do not wish to breed dependency. banks are to take up their intermediation again and should have all appropriate incentives to do so