, is dampening economic sentiment, notably in the manufacturing sector. in this environment, inflationary pressures remain muted and indicators of inflation expectations have declined. therefore, a significant degree of monetary stimulus continues to be necessary to ensure that financial conditions remain very favourable and support the euro area expansion, the ongoing build - up of domestic price pressures and, thus, headline inflation developments over the medium term. let me now explain our assessment in greater detail, starting with the economic analysis. following a rise of 0. 2 % in the fourth quarter of 2018, euro area real gdp increased by 0. 4 %, quarter on quarter, in the first quarter of 2019. incoming economic data and survey information continue to point to somewhat slower growth in the second and third quarters of this year. this mainly reflects the ongoing weakness in international trade in an environment of prolonged global uncertainties, which are particularly affecting the euro area manufacturing sector. at the same time, activity levels in the services and construction sectors are resilient and the labour market is still improving. looking ahead, the euro area expansion will continue to be supported by favourable financing conditions, further employment gains and rising wages, the mildly expansionary euro area fiscal stance and the ongoing – albeit somewhat slower – growth in 1 / 3 bis central bankers'speeches global activity. the risks surrounding the euro area growth outlook remain tilted to the downside, reflecting the prolonged presence of uncertainties, related to geopolitical factors, the rising threat of protectionism, and vulnerabilities in emerging markets. euro area annual hicp inflation increased to 1. 3 % in june 2019, from 1. 2 % in may, as higher hicp inflation excluding food and energy more than offset lower energy price inflation. on the basis of current futures prices for oil, headline inflation is likely to decline over the coming months, before rising again towards the end of the year. looking through the recent volatility due to temporary factors, measures of underlying inflation remain generally muted. indicators of inflation expectations have declined. while labour cost pressures have strengthened and broadened amid high levels of capacity utilisation and tightening labour markets, the passthrough of cost pressures to inflation is taking longer than previously anticipated. over the medium term underlying inflation is expected to increase, supported by our monetary policy measures, the ongoing economic expansion and stronger wage growth. turning to the monetary analysis, broad money ( m3 ) growth stood at 4. 5 % in june 2019, after 4. 8 % in may

’ s policy rates. money market rates in the euro area have now reached very low levels by international standards. lower money market rates have also led to lower interest rates for private households and firms, although the decline in money market rates has so far been greater than the decline in interest rates on credit for households and firms. the fiscal authorities in the euro area have also demonstrated their capacity to react rapidly to exceptional circumstances. in a coordinated effort, the national governments of the euro area have provided support to the banking system, most notably through recapitalisation and guarantees for liabilities and assets. the funds provided under the package announced to stabilise the financial sector through these types of measure amount to 23 % of the euro area ’ s gdp. the overall fiscal stimulus – through discretionary policy measures and the effect of automatic stabilisers – amounts to 3. 6 percentage points of gdp for 2009 and 2010. overall, during the ongoing financial market turbulence, the euro area and the eu as a whole have proved their capacity to act decisively and promptly under difficult circumstances. lessons from the crisis the current financial crisis has pointed to a number of weaknesses that need to be addressed if we are to avoid a similar crisis in the future. some weaknesses are rooted in the current design of the international financial system. this is particularly true with regard to the lack of transparency and accountability within the financial system. in this respect, much relies on financial players themselves taking responsibility for evaluating risk more effectively and increasing transparency as regards risk. in addition, various initiatives at national, european and international level aim, in particular, to improve the robustness of the financial system i would like to highlight three areas where i think change is necessary : there needs to be an increase in transparency, a dampening of pro - cyclicality and an improvement in institutional design in the field of financial supervision and regulation. first, we need to undergo global regulatory and supervisory repair. the basel committee has already set some milestones in this regard including the publication of the principles for sound liquidity risk management and supervision and its current work on strengthening the basel ii capital framework. work is also underway concerning the development of measures to mitigate pro - cyclicality stemming from the regulatory frameworks, namely by building buffers in good times that can be withdrawn in less benign conditions. in this context, let me recall that the g20 leaders approved the recommendations by the fsb to address procyclicality, which are to be implemented by the end of