has been revised upwards. the risks surrounding the economic outlook for the euro area continue to be on the downside. geopolitical risks, as well as developments in emerging market economies and global financial markets, may have the potential to affect economic conditions negatively. other downside risks include weaker than expected domestic demand and insufficient implementation of structural reforms in euro area countries, as well as weaker export growth. according to eurostat ’ s flash estimate, euro area annual hicp inflation was 0. 5 % in may 2014, after 0. 7 % in april. this outcome was lower than expected. on the basis of the information available to us at today ’ s meeting, annual hicp inflation is expected to remain at bis central bankers ’ speeches low levels over the coming months, before increasing only gradually during 2015 and 2016, thereby underpinning the case for today ’ s decisions. meanwhile, inflation expectations for the euro area over the medium to long term continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2 %. looking ahead, the governing council is strongly determined to safeguard this anchoring. our assessment has been supported by the june 2014 eurosystem staff macroeconomic projections for the euro area. they foresee annual hicp inflation at 0. 7 % in 2014, 1. 1 % in 2015 and 1. 4 % in 2016. in the last quarter of 2016, annual hicp inflation is projected to be 1. 5 %. in comparison with the march 2014 ecb staff macroeconomic projections, the projections for inflation for 2014, 2015 and 2016 have been revised downwards. it should be stressed that the projections are conditional on a number of technical assumptions, including exchange rates and oil prices, and that the uncertainty surrounding each projection increases with the length of the projection horizon. the governing council sees both upside and downside risks to the outlook for price developments as limited and broadly balanced over the medium term. in this context, we will closely monitor the possible repercussions of geopolitical risks and exchange rate developments. turning to the monetary analysis, data for april 2014 continue to point to subdued underlying growth in broad money ( m3 ). annual growth in m3 moderated further to 0. 8 % in april, from 1. 0 % in march. the growth of the narrow monetary aggregate m1 moderated to 5. 2 % in april, after 5. 6 % in march. in the recent past, the increase in the mfi net external

difficulties to issue unsecured bonds and thus can worsen their access to private sources of refinancing. the ecb ’ s measures during the financial crisis let me now turn to the concrete measures that the eurosystem has undertaken during the crisis. when rumours about some european banks ’ exposure to the us subprime market in august 2007 strongly affected money market interest rates and trading volumes within just a few hours, the ecb reacted by providing liquidity to the banking sector on a short - term basis – first overnight, then for slightly longer maturities. this served to ensure that solvent banks would obtain the liquidity that was disappearing from other sources. the first overnight provision of liquidity by the ecb of almost € 100 billion was demand - driven and revealed the see allen, f, chui, m., and a. maddaloni, a., 2004. “ financial systems in europe, the u. s. a. and asia. ” oxford review of economic policy 20 ( 4 ) : 490 – 508. bis central bankers ’ speeches high uncertainty within the banking sector on the ability to obtain funding from private sources. in general, during the first year of the crisis, there was a high degree of uncertainty on individual exposures, but not yet a very strong perception of more severe problems in the banking sector as a whole. central bank liquidity provision thus aimed at stabilising interest rates, and ensured that temporary liquidity problems of banks would not create problems for bank solvency. the eurosystem was able to deal with these tensions by only slightly altering its operations under the standard operational framework. this was due to the fact that the number of counterparties to monetary policy operations has historically been very large in the euro area, and because the standard framework offers quite some flexibility. in a nutshell, during this first phase of the crisis, the eurosystem ( 1 ) more flexibly used its open market operations by changing the time - path of liquidity provision and employing fine - tuning operations, ( 2 ) lengthened the maturity structure of its open market operations ( for instance, operations with a maturity of six months were introduced, whereas the maximum length had been three months before the crisis ), and ( 3 ) coordinated with other central banks around the world to provide us dollar funding. 4 the failure of lehman brothers in september 2008 and the subsequent very severe financial market tensions led the eurosystem to adopt further measures. official interest rates were cut