envisaged in the projections for the recovery to materialise, for productivity growth to pick up, and for both to be sustained. but as economic conditions normalise, wage growth should gradually moderate over the medium term to be consistent with trend productivity growth and our inflation target. the improving inflation outlook, continued strong transmission and further moderation in inflation all create scope for more confidence that we can dial back restriction. we are coming closer to the point when we will have the confidence to act. thank you. annexes 27 march 2024 slides english 1. see lagarde, c. ( 2024 ), “ building confidence in the path ahead ”, speech at the ecb and its watchers xxiv conference, frankfurt am main, 20 march. 2. euro area employment increased by 3. 8 % from the fourth quarter of 2019 to the fourth quarter of 2023. 3. while the reopening of the economy led to a wave of pent - up demand facilitated by savings that had been accumulated during the pandemic, it was largely negative supply shocks – pandemic - induced supply bottlenecks, the energy crisis and russia ’ s war against ukraine – that drove the sharp spike in headline inflation. see arce, o. ciccarelli, m., kornprobst, a. and montes - galdon, c. ( 2024 ), “ what caused the euro area post - pandemic inflation? ”, occasional paper series, no 343, ecb, frankfurt am main. recent findings indicate that core inflation in the euro area was also largely driven by supply - side shocks during the post - pandemic recovery. see banbura, m., bobeica, e. and martinez hernandez, c. ( 2024 ), “ shocked to the core : a new model to understand euro area inflation ”, research bulletin, no 117, ecb, frankfurt am main. 4. the euro area imports around two - thirds of its energy, compared with just over one - fifth for the united states. 5. real compensation per employee declined by 3. 2 % in the first half of 2022 compared with the end of 2021. 6. nominal wage growth has also been bolstered by increases in minimum wages at the national level. 7. see eurostat data and march 2024 ecb staff macroeconomic projections. growth in nominal compensation per employee increased to 5. 1 % in 2023 ( up

property investors have increased. funding costs and risks have also grown, raising costs for leveraged property investors and, in turn, contributing to the observed negative price dynamics in some markets. iii. 3 the euro area financial system turning to the euro area financial system, conditions in the euro area and other major money markets deteriorated significantly in mid - september, as the default of lehman brothers fuelled concerns about counterparty credit risk and challenged the widely - held view that any large bank, which was considered too big or too interconnected to fail, would be supported by public authorities. this event triggered a sharp increase in the spreads between euribor and eonia swap rates across all maturities ( as shown in chart 12 ). banks hoarded liquidity ( or lent only for the shortest maturities ) in view of growing concerns about the creditworthiness of counterparties and heightened uncertainty about their own liquidity positions. conditions in money markets in other advanced economies exhibited similar developments. since mid - september, central banks have stepped up the already remarkable levels of cooperation and provided liquidity in coordinated actions. moreover, the ecb and also other central banks have made extensive efforts to provide refinancing at longer maturities and to expand the lists of assets that are eligible as collateral in credit operations. not least thanks to these actions, the recent weeks have seen a noticeable improvement in the euro money market. for example, in the past week, the spreads between term deposit and overnight index swap rates declined considerably, by 15 to 20 basis points along all maturities, reflecting the continued fall in the euribor rates. the spreads fell to 80 basis points for the one - month maturity and 160 basis points for the 12 - month maturity. an interesting analysis related to the current problems in the money markets is presented in box 7 of the review which highlights the link between market liquidity and funding liquidity risk, on the basis of evidence from recent data. the results show that a negative relationship between high funding liquidity risk and low market liquidity was established only after the financial turmoil had erupted, while in “ normal ” times, there is no obvious relationship between the two measures. this supports the theoretical proposition ( advanced by recent academic research ) that interactions between the two measures emerge only when banks face funding constraints, that is, when shocks to banks ’ funding liquidity can lead to forced asset sales and may depress asset prices, with dire consequences for market liquidity. the tensions in the money market, and