in view of the uncertainty surrounding the impact of the pandemic. the economic downturn has also adversely affected inflation dynamics. as foreseen in our baseline scenario, headline inflation has been declining over the last few months. it turned negative in august and fell further, to – 0. 3 %, in september, dampened by weak demand and the previous collapse in oil prices, but also by temporary factors. our projections foresee headline inflation remaining negative into early next year, and coming in at 0. 3 % on average in 2020. looking further ahead, we expect headline inflation to rise gradually, to 1. 0 % in 2021 and 1. 3 % in 2022. ample economic slack, low energy prices and the recent appreciation of the euro are expected to continue to weigh on the inflation outlook. our monetary policy response to the pandemic shock to counter the effects of the pandemic shock as expected in our baseline scenario, we have adopted a package of appropriate, proportionate and complementary measures. these measures are showing their effect and aim to safeguard medium - term price 1 / 3 bis central bankers'speeches stability. these measures have reinforced the monetary accommodation that was already in place before the pandemic. in terms of policy tools, our response to the pandemic has been structured along two key axes : lending operations and asset purchases. notably, we have provided banks with access to central bank liquidity on generous terms, and over long maturities, to help them continue to provide credit. to this end, our longer - term liquidity refinancing operations have played a key role in supporting the bank lending channel and thereby the smooth and even transmission of our monetary policy. in particular, our targeted longer - term refinancing operations ( tltro iii ) have supported the supply of credit during the pandemic. this has been particularly relevant as pandemic - related falls in revenues have forced firms to take on additional debt to finance working capital and other requirements. as a result, credit growth has been substantial, and not only in comparison to other historical crisis periods. this credit growth accommodated firms ’ liquidity needs and supported their ongoing activities, but we have also seen a rise in financial asset and real estate prices. the annual growth rate of loans to firms stood at 7. 1 % in august, 4. 1 percentage points higher than in february. our tltro iii programme has seen a sizeable takeup by banks, with a combined

the determination and perseverance of a series of visionary leaders. and we owe it to the effective interplay between european institutions. the european parliament played a crucial role at the pioneering stage. the parliament was the first european institution to make proposals for a single currency, back in 1962. and in the past ten years, since the establishment of the ecb, our institutions have maintained a very close and fruitful dialogue. this dialogue has involved over 50 hearings of the members of the executive board before this parliament. the dialogue between the parliament and the ecb is a very important exchange in terms of accountability, allowing the ecb to explain its decisions and actions to the general public and their elected representatives. ladies and gentlemen, during its first years of existence, the euro had to face major trials : the establishment of a sound and credible central bank and the creation of a stable new currency inspiring confidence. these challenges were overcome successfully and the euro is today firmly established. hence, this is certainly a time for celebration. but it is no time for complacency. current challenges are pressing, and new challenges will arise. the continued success of emu will depend on how these challenges are addressed. this is the main responsibility for all authorities involved. let me mention three major challenges. first, the financial crisis. the crisis has revealed fundamental weaknesses in the global financial system. we are playing an active part in the global efforts to address these weaknesses and redesign the regulatory and institutional framework. a lot of work remains to be done. second, economic union. the solidity of the single currency rests on two pillars : a monetary policy firmly geared towards price stability and a set of sound economic policies. the particular challenges on the economic front include the firm and credible implementation of the stability and growth pact, constant efforts to render our economies more productive, innovative and dynamic, and the avoidance of major competitive divergences within the euro area. third, enlargement. when we started out ten years ago, we were 11 countries. as of 1 january this year, we are now 16 countries. this says a lot about our historic endeavour. handling enlargement in the best fashion possible is a very inspiring and demanding challenge for all of us. the euro is a historic achievement. what matters most today is our responsibility for the future. new challenges are arising. if these challenges are faced with utmost lucidity and audacity, they can generate the powerful ideas which jean monnet referred to, and which