period ahead, we will monitor all incoming information on economic and monetary developments and assess any impact on the outlook for price stability. the accommodative stance of our monetary policy, together with the significant improvements in financial markets since mid - 2012, should help to support prospects for an economic recovery later in the year and in 2014. on non - standard measures, the governing council decided in may to continue conducting all refinancing operations as fixed - rate tender procedures with full allotment, at least until mid - july 2014. this measure will help to support a smooth transmission of the ecb ’ s bis central bankers ’ speeches monetary policy stance. in particular, it will ensure that banks ’ lending decisions are not impaired by funding constraints. the governing council also decided in may to start consultations with other european institutions on initiatives to promote a functioning market for asset - backed securities ( abs ) collateralised by loans to non - financial corporations. before discussing this issue in more depth, let me briefly comment on the economic outlook. economic activity in the euro area contracted for a sixth consecutive quarter in the first quarter of 2013. labour market conditions remain weak. recent confidence indicators based on survey data have shown some further improvement, albeit from low levels. overall, euro area economic activity should stabilise and recover over the course of the year, although at a subdued pace. the risks surrounding the economic outlook for the euro area continue to be on the downside. the recent tightening of global money and financial market conditions and related uncertainties may have the potential to negatively affect economic conditions. other downside risks include the possibility of weaker than expected domestic and global demand and slow or insufficient implementation of structural reforms in euro area countries. annual inflation in the euro area has continued to moderate, falling from 2. 5 % in 2012 to 1. 6 % in june. looking ahead, the underlying price pressures over the medium term are expected to remain subdued, reflecting the broad - based weakness in aggregate demand and the modest pace of the recovery. inflation expectations nonetheless continue to be firmly anchored in line with the governing council ’ s aim of maintaining inflation rates below, but close to 2 %. risks to the outlook for price developments are expected to be still broadly balanced over the medium term. upside risks relate to stronger than expected increases in administered prices and indirect taxes, as well as higher commodity prices. downside risks stem from weaker than expected economic activity. consistent with our expectations of low underlying inflationary pressures over the medium

mario draghi : hearing at the committee on economic and monetary affairs of the european parliament introductory statement by mr mario draghi, president of the european central bank, for the hearing at the committee on economic and monetary affairs of the european parliament, brussels, 8 july 2013. * * * madam chair, honourable members of the committee on economic and monetary affairs, it is a great pleasure for me to be back with your committee for our last exchange of views before the summer break. at this time, it is worth taking stock of progress over the past 12 months. clearly, financial conditions in the euro area today are more stable and resilient than they were last summer. this is partly due to our determined monetary policy actions. governments and parliaments have also played a key role in the relative return of confidence and stability by undertaking courageous reforms, at both the national and european levels. yet despite this progress, the euro area still faces considerable challenges. the economy is still weak. financial fragmentation remains. this challenges the very concept of the single market. small and medium - sized enterprises ( smes ) can find it difficult to access credit, particularly in countries under strain ; and several key steps remain to be taken to complete the banking union. these are the three topics that i will address in turn today. 1. economic and monetary developments let me first briefly discuss our recent monetary policy decisions. in may, the governing council of the european central bank ( ecb ) decided to lower the interest rate on the main refinancing operations by 25 basis points to 0. 50 % and the rate on the marginal lending facility by 50 basis points to 1. 00 %. the rate on the deposit facility was left unchanged at 0 %. these policy decisions took account of subdued underlying inflationary pressures over the medium term and they are expected to improve funding conditions across the whole monetary union. following its july meeting, the governing council stressed that the monetary policy stance is geared towards maintaining the degree of monetary accommodation warranted by the outlook for price stability and promoting stable money market conditions. it reiterated that its monetary policy stance will remain accommodative for as long as needed. furthermore, the governing council sharpened its communication by announcing that it expects the key ecb interest rates to remain at present or lower levels for an extended period of time. this expectation was based on the overall subdued outlook for inflation extending into the medium term, given the broad - based weakness in the real economy and subdued monetary dynamics. in the