luis de guindos : the euro area economy and our monetary policy stance remarks by mr luis de guindos, vice - president of the european central bank, during the instituto de empresa ( ie ) business leadership forum at the ie business school, madrid, 10 june 2019. * * * recent economic developments despite the somewhat better than expected data for the first quarter, in part due to temporary factors, the most recent information indicates that global headwinds continue to weigh on the euro area outlook. in particular, world trade remains subdued due to rising trade tensions and the global growth momentum has slowed somewhat, mainly on account of the weakness in manufacturing. moreover, downside risks have increased on account of the re - escalated trade dispute between the us and china. also, uncertainty surrounding brexit is prolonged and fragilities in emerging market economies remain. while inflation is expected to rise gradually due to tightening labour markets and rising wages, current dynamics of underlying inflation remain muted. it is against this background, that the governing council decided a number of policy measures at its last meeting, including an extension of its forward guidance on policy interest rates, a confirmation of the reinvestment policy and favourable pricing conditions for our new series of targeted longer term refinancing operations ( tltro iii ). euro area real gdp growth came in at 0. 4 % quarter - on - quarter in the first quarter of 2019, surprising somewhat on the upside. the better than expected outcome was in part driven by temporary factors, such as the mild weather supporting a pick - up in construction and some sector specific developments. economic indicators suggest that domestic demand remains resilient, as signalled by the growth of consumption, which grew 0. 5 % quarter - on - quarter in the first quarter of the year, and investment, which grew by 1. 1 % during the same period. while first quarter growth was somewhat stronger than previously anticipated, incoming data and survey information point to somewhat more moderate growth over the next few quarters. this reflects the ongoing weakness in international trade in an environment of prolonged global uncertainties, which are weighing, in particular, on the euro area manufacturing sector. in fact, some leading indicators such as manufacturing pmi and the ecb indicator on euro area new orders have declined recently, confirming weakening dynamics in the euro area manufacturing sector. at the same time, the euro area services and construction sectors are showing resilience and the labour market is continuing to improve. looking forward,

restriction. in particular, our interest rate decisions will be based on our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission. we are not pre - committing to a particular rate path. the decisions taken today are set out in a press release available on our website. as announced on 13 march 2024, some changes to the operational framework for implementing monetary policy will take effect from 18 september. in particular, the spread between the interest rate on the main refinancing operations and the deposit facility rate will be set at 15 basis points. the spread between the rate on the marginal 1 / 4 bis - central bankers'speeches lending facility and the rate on the main refinancing operations will remain unchanged at 25 basis points. i will now outline in more detail how we see the economy and inflation developing and will then explain our assessment of financial and monetary conditions. economic activity the economy grew by 0. 2 per cent in the second quarter, after 0. 3 per cent in the first quarter, falling short of the latest staff projections. growth stemmed mainly from net exports and government spending. private domestic demand weakened, as households consumed less, firms cut down business investment and housing investment dropped. while services supported growth, industry and construction contributed negatively. according to survey indicators, the recovery is continuing to face some headwinds. we expect the recovery to strengthen over time, as rising real incomes allow households to consume more. the gradually fading effects of restrictive monetary policy should support consumption and investment. exports should also continue contributing to the recovery as global demand rises. the labour market remains resilient. the unemployment rate was broadly unchanged in july, at 6. 4 per cent. at the same time, employment growth slowed to 0. 2 per cent in the second quarter, from 0. 3 per cent in the first. recent survey indicators point to a further moderation in demand for labour, and the job vacancy rate has fallen closer to prepandemic levels. fiscal and structural policies should be aimed at making the economy more productive and competitive, which would help to raise potential growth and reduce price pressures in the medium term. mario draghi's report on the future of european competitiveness and enrico letta's report on empowering the single market stress the urgent need for reform and provide concrete proposals to make this happen. implementing the eu's revised economic governance framework fully, transparently and without delay will