in june 2014, bank lending rates for euro area non - financial corporations have fallen by around 120 basis points and those for households by around 110 basis points. rates on very small loans, which can be taken as a proxy for loans to small and medium - sized enterprises ( smes ), have declined by around 200 basis points. the significant improvement in funding conditions for smes is especially encouraging as these companies provide two - thirds of total private sector employment in the euro area. heterogeneity of lending rates across countries has also fallen sharply. for example, the difference between the average lending rate for firms in countries which were severely affected by the crisis and that in other countries has narrowed by more than 100 basis points over this period. the passthrough of monetary policy has become more even. banks are also passing on the favourable funding conditions to their customers due to the second series of targeted longer - term refinancing operations ( tltro - ii ), which further supports these positive developments. 3 1 / 3 bis central bankers'speeches the sharp reduction in bank lending rates has been accompanied by easier access to funding, which continues to improve, according to the latest survey results. 4 furthermore, bank lending volumes have been gradually recovering since early 2014. according to the latest survey on the access to finance of enterprises, covering the period from april to september 2017, euro area smes have continued to see improvements in the availability of bank loans. market - based funding conditions, too, have improved significantly in response to the corporate sector purchase programme launched in june 2016. against the backdrop of this substantial easing of financing conditions, domestic demand has become the mainstay of growth in the euro area, making the recovery more resilient to developments overseas. meanwhile, real gdp growth is projected to remain above potential growth in the coming years. the acceleration in the cyclical momentum and the ongoing reduction of economic slack strengthen our confidence that inflation will converge towards our inflation aim of below, but close to, 2 %. but inflation continues to be lacklustre. after lingering at levels well below 1 % for three years, with occasional dips into negative territory, euro area headline inflation increased towards the end of 2016 and has fluctuated between 1. 3 % and 1. 5 % since may of last year. annual inflation stood at 1. 3 % in january, according to eurostat ’ s flash estimate. looking ahead, on the basis of current futures prices for oil, annual rates of

3 bis central bankers'speeches gradually, patience and persistence in our monetary policy remain warranted. in the light of this, the governing council in january maintained all elements of its accommodative monetary policy stance. together, our monetary policy measures will preserve the ample degree of accommodation that remains necessary for inflation pressures to continue to build up and support headline inflation developments over the medium term. looking ahead, monetary policy will evolve in a data - dependent and time - consistent manner. once the governing council judges that the three criteria for sustained adjustment – convergence, confidence and resilience – have been met, net asset purchases will expire, in line with our guidance. from that point in time, the evolution of inflation will remain conditional on reinvestments continuing for an extended period of time and on policy rates remaining at their present levels well past the end of our net asset purchases. the stock of long - duration assets held in our portfolio will continue to put downward pressure on longer - term interest rates well beyond the end of our net purchases. policy rates remaining at their present levels well past the end of our net purchases will contribute to holding the short to intermediate portions of the yield curve in check for as long as necessary, thereby ensuring that financial conditions remain consistent with a sustained adjustment of inflation. 1 i would like to thank danielle kedan for her support in preparing this speech. 2 see, for example, the european commission ’ s “ european economic forecast – autumn 2017 ”. potential growth was estimated at 1. 4 % for 2017 and 1. 5 % for 2018 and 2019. 3 for more details, see the box entitled “ the targeted longer - term refinancing operations : an overview of the take - up and their impact on bank intermediation ”, economic bulletin, issue 3, ecb, 2017. 4 see the ecb ’ s euro area bank lending survey, january 2018, and the ecb ’ s survey on the access to finance of enterprises in the euro area, april to september 2017. 5 see the box entitled “ assessing labour market slack ”, economic bulletin, issue 3, ecb, 2017. 3 / 3 bis central bankers'speeches