experience in other jurisdictions show that the asset purchase programme can work. what is the evidence that the easing of financial conditions is finally starting to affect the real economy? the expanded asset purchase programme and the outlook for growth and inflation developments are pointing in the right direction. the so - called surprise index that compares actual macroeconomic data with consensus estimates of market analysts shows that on average the latest news is positive. the slowdown in growth has reversed. euro area real gdp rose by 0. 3 % quarter on quarter in the last quarter of 2014, which is somewhat higher than previously expected. survey evidence points to further improvements in economic activity at the beginning of this year so that the economic recovery should gradually broaden and strengthen. and in january, the euro area unemployment rate dropped to the lowest level observed since august 2012. of course, these improvements cannot and should not solely be attributed to our monetary easing. but our monetary policy is certainly supporting the recovery. this is also reflected in the ecb staff macroeconomic projections that we published last week. in those projections, expectations for real gdp have been revised upwards, both for 2015 and 2016, relative to the previous exercise. these upward revisions are mainly driven by the favourable impact of lower oil prices, the weaker effective exchange rate of the euro – and the impact of our recent monetary policy measures. the latter have had a very substantial impact on what we call “ market - based technical financial assumptions ”, such as interest rates, exchange rates and stock prices, with the effect being especially large on longterm interest rates. annual hicp inflation, in turn, is expected to remain very low or negative in the months ahead and to start increasing gradually later this year. the ecb staff projections for inflation bis central bankers ’ speeches this year have been revised downwards to 0. 0 %. this mainly reflects the sharp drop in oil prices at the end of last year. but there is good reason to believe that the effect of this shock will not extend beyond 2015, in part because our monetary policy decisions have significantly decreased the risk of second - round effects. accordingly, the inflation projection for 2016 has been revised slightly upwards to 1. 5 % ; and for 2017 inflation is expected to be 1. 8 %. this expected pick - up in inflation is supported by the favourable impact of our recent monetary policy measures on aggregate demand, the impact of the lower euro exchange rate and the assumption of somewhat higher oil prices in the years ahead. the ecb staff projections fully incorporate the

after a gradual winding - down of our net asset purchases. accordingly, at its last monetary policy meeting the governing council confirmed that it continues to expect the key ecb interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 % over the medium term. the governing council also decided to reduce the monthly pace of the net purchases under the asset purchase programme ( app ) to €15 billion from october until the end of december 2018 and anticipated that, subject to incoming data confirming our medium - term inflation outlook, net purchases will then end. finally, the governing council also confirmed its intention to reinvest the principal payments from maturing securities purchased under the app for an extended period of time after the end of our net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. significant monetary policy stimulus is still needed to support the further build - up of domestic price pressures and headline inflation developments over the medium term. this support will continue to be provided by the net asset purchases until the end of the year, by the sizeable stock of acquired assets and the associated reinvestments, and by our enhanced forward guidance on the key ecb interest rates. in any event, the governing council stands ready to 1 / 3 bis central bankers'speeches adjust all of its instruments as appropriate to ensure that inflation continues to move towards the governing council ’ s inflation aim in a sustained manner. the financial health of the euro area banking sector has continued to improve. although showing a slight decrease from 14. 6 % at the end of 2017, the aggregate common equity tier 1 ratio of euro area significant institutions stood at 14. 1 % at the end of the first quarter of 2018. banks have made progress in reducing their stocks of non - performing loans ( npls ). in the first quarter of 2018, the npl ratio for euro area significant institutions dropped further, to 4. 8 %, compared with 5. 9 % a year earlier. however, euro area banks ’ profitability remains subdued. the average return on equity of euro area significant institutions declined to 6. 6 % in the first quarter of 2018, from 7. 1 % a year earlier. in this context, eu and national authorities are still following up on a comprehensive action plan for dealing with legacy asset quality issues