by no means been the only force driving disinflation in the euro area. if we decompose inflation in the euro area and the united states, a striking difference is that, at least until the start of this year, domestic factors explain a much more important part of our disinflationary trend ( figure 3 ). this stronger role for domestic forces in the euro area has contributed to core inflation diverging from some other advanced economies. it has hovered consistently around 1 % since mid - 2013 ( figure 4 ). the ecb ’ s objective is headline inflation, and there are good reasons for this, not least to keep purchasing power stable. headline inflation is also a better predictor of short - term inflation developments. but core inflation has to be taken into account because it is more closely linked to medium - term inflation trends. in fact, ecb staff analysis shows that core inflation is a better predictor of medium - term headline inflation than headline itself. persistently low core inflation is therefore a risk to our mandate. so why have domestic factors affected inflation more in the euro area? the main reason is that, from 2011 onwards, the euro area experienced a sovereign debt crisis and a double - dip recession, while other advanced economies recovered ( figure 5 ). that led to a very prolonged downturn, which was associated with a decline in employment, depressed wage growth, and low business and consumer confidence. according to ecb estimates, disinflation in this period is well explained by the existence of a very wide output gap. 2 the divergence in core inflation between the euro area and other advanced economies, in other words, is a story of domestic economic weakness. this has particularly been reflected in weak services inflation, which is more strongly determined by the domestic economy and domestic wage pressures than other inflation components. and with services making up 43. 5 % of the consumption basket, that creates a strong drag on overall inflation. services are also an important input into manufacturing, causing low services inflation to spillover into prices of domestic industrial goods. looking at the situation today, we do see some improvements as the economic recovery takes hold. as domestic demand strengthens, inflation has risen from its trough. in recent months, the share of items in the consumption basket with an inflation rate below 1 % has fallen slightly, and crucially, the share with an inflation rate below 0 % has fallen significantly, from 33 % at the beginning of the year to below 21 % now.

, published a new vision and strategy document ( vision 2010 ) for the nps in april this year. the purpose of this document was to provide high - level strategic guidance for the payment system up to 2010. finally, there appears to be a general misunderstanding that the bank has a " hands off " approach to the oversight and regulation of the nps. i would remind all nps stakeholders that section 10 ( i ) ( c ) of the south african reserve bank act states clearly that the bank, " perform such functions, implement such rules and procedures and, in general take such steps as may be necessary to establish, conduct, monitor, regulate and supervise payment, clearing or settlement systems ”. furthermore, as i noted earlier, the 2004 amendment to the nps act makes provision for the bank to issue directives pertaining to the nps. we raise this issue as the bank will soon be issuing directives in terms of the nps act which will regulate non - bank participants in the nps for the first time. we have noticed that the number of nonbank participants has increased to the extent that the risk associated with their operations and the risk that they bring to the clearing and settlement environment requires some formalisation. of particular relevance in this regard are system operators and third party service providers, who mostly operate in or on behalf of the retail sector. we want to make it clear, particularly to the banking sector, that strict regulation will be applied as far as the nps is concerned. this should not be perceived negatively, nor do we wish to stifle innovation or competition in the industry. however we need to apply strict supervision and regulation to both bank and non - bank participants in the critical area of the nps and avoid the risk of turbulence that may emanate from a hands - off approach to regulation. this may require some adjustment to current structures in the nps and the bank will have to start playing a far more prominent role in areas such as supervision, regulation and licensing of participants. we also need to ensure that these newly regulated entities have channels to engage with the bank and other stakeholders, including pasa, in a fair and transparent way. the bank has already initiated discussions with various international central banks and consulted with nps stakeholders with a view to adopting a model which will facilitate such engagement. this may take some time but i can assure you that the bank will continue with the collaborative approach it has used for nps matters in the past before making any final decisions in