euro area as a whole. third, these downward movements of current and expected inflation occur in an environment characterised by already weak demand. the recovery is too moderate to push inflation decisively back to our focal point for price stability on its own. according to the latest ecb staff projections, real gdp is expected to increase by 1. 0 % in 2014, 1. 7 % in 2015 and 1. 8 % in 2016. hence, the adverse shock to inflation will not correct itself easily. a continued accommodative monetary policy stance is therefore necessary to maintain price stability. it is against this background that the governing council decided last month on the package of mutually reinforcing measures to further strengthen the degree of monetary policy accommodation. we lowered the interest rate on the main refinancing operations to 0. 15 % and the rate on the marginal lending facility to 0. 40 %. the rate on the deposit facility was lowered to – 0. 10 %. furthermore, we continued our forward guidance and clarified that that key ecb interest rates will remain at present levels for an extended period of time. as part of the set of measures, it is our objective for this rate cut to stimulate activity through improved borrowing conditions. it should also provide incentives to banks to lend to other banks, rather than deposit excess liquidity with the eurosystem. the fact that with the negative deposit facility rate banks now have to pay money for such deposits may be particular relevant in that respect. the lower deposit facility rate also prevents a compression of the interest rate corridor. such a compression could negatively affect money market activity as banks lack incentives to actively manage their liquidity position. thus the reduction in the deposit facility rate should also contribute to reducing the persisting fragmentation in cross - border lending in euro area money markets. overall, the lower rates will contribute to an appropriate monetary policy stance and thereby aim to ensure our objective of maintaining price stability. second challenge : still hampered monetary policy transmission let me move to the second challenge : as long as we are below our focal point for inflation over the medium term, we want to ensure that our measures are effective in pushing inflation back to our medium - term price stability objective and that they are transmitted smoothly and quickly through the economy. this is especially important when approaching the lower bound on interest rates. how does this apply to current circumstances? under normal circumstances, a reduction in our key policy rates is translated relatively smoothly to financing conditions across different euro area countries. certainly, we have

. the governing council is unanimous in its commitment to using also unconventional instruments within its mandate should it become necessary to further address risks to price stability. yet, while monetary policy can provide support, especially through non - standard measures, to overcome the risk of secular stagnation, the underlying causes of low growth are structural and need to be addressed by other policy areas. this is visible in the relatively weak estimates of potential output growth for the euro area. the on - going structural, fiscal and financial sector policy reform should lead to a rebalancing of saving and investment over the medium - term accompanied by a stronger demand for investment and therefore a higher natural rate of interest. but there is clearly considerable scope to raise potential growth in the euro area even further given the relative inflexibility of product and labour markets and the incompletion of the single market. a concerted process of structural reform, continuing the progress made in recent years, would tend to raise investment demand by increasing expectations of future productivity and thereby making larger set of investment projects profitable. creating new opportunities through a reduction in entry barriers into specific areas, such as highly regulated service sectors, or by increasing the scope for cross - border projects would support also investment incentives. see rajan, raghuram ( 2013 ), “ a step in the dark : unconventional monetary policy after the crisis ”, andrew crockett memorial lecture. bis central bankers ’ speeches conclusions let me conclude. the good news is that the euro area is on a gradual but nevertheless fragile recovery path. but we face important challenges. first, inflation has declined to very low level and is expected to come back to levels close to 2 % only very gradually. here, we have to ensure that these developments do not become entrenched in inflation expectations, which can pose a threat to our primary objective to maintain price stability. second, while financial market conditions are improving, our accommodative monetary policy does not reach the real economy evenly. credit conditions for smes in particular are still tight and access to credit is limited. third, and more generally, we need to be mindful of possible risks of falling into a regime of long - term economic stagnation, if not countered by appropriate policies. although the role of monetary policy is clearly limited in this context, a scenario of secular stagnation entails important potential challenges for monetary policy. in june, the governing council decided a package of measures to provide additional monetary stimulus and support lending to