interest rate to be primarily governed by expectations of potential growth, the propensity to save and technological advances. i will therefore first describe how the various factors can influence the real interest rate. i will then discuss possible explanations as to how growth, propensity to save and technology may change. lower potential global growth gives lower global real interest rate according to economic theory, expected growth should play an important role for the development of the real interest rate ; the lower the growth, the lower the real interest rate. international organisations such as the imf and the oecd have made downward adjustments to their assessments of the global growth trend in recent years. this could lead to a lower real interest rate. at the same time, one can note that global growth was both stable and relatively high during the 15 – 20 years prior to the financial crisis. it is thus not possible to explain the long - term fall in interest rates prior to the financial crisis as due to lower global growth. one possible explanation could instead be that the global population increase has fallen over a long period of time, and is expected to continue falling in the coming period. this could contribute to lower potential growth in that the labour force will increase at a slower pace. at the same time, this effect will be counteracted if labour productivity rises. slower population growth and the fact that the working age population is shrinking indicate that growth will remain lower than in the pre - crisis decades. the prospects for labour productivity are much more difficult to assess. the rate of increase in labour productivity declined in connection with the economic downturn following the financial crisis and it is uncertain how lasting the effects will be. demography affects propensity to save and thus the real interest rate demographic developments also affect the propensity to save. life expectancy has increased and the birth - rate has fallen in recent decades. this has meant that the population has aged in most parts of the world. it applies especially in developed countries but also in countries such as china and several other emerging markets. merely the fact that people are on average living longer means that they need to save more money for their old age, unless the retirement age is raised at the same pace as the increase in life expectancy. developments have also entailed a percentage increase in the older working age population ( 40 – 65 years old ) – which normally has a high level of saving – in recent decades. there is thus good reason to assume that demographical developments have contributed to an increased

, while monetary liquidity remains ample with the potential to accommodate price pressures in the euro area. all in all, it is essential that the recent price developments do not give rise to broad - based inflationary pressures over the medium term. our decision will contribute to keeping inflation expectations in the euro area firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2 % over the medium term. such anchoring is a prerequisite for monetary policy to contribute to economic growth in the euro area. at the same time, interest rates across the entire maturity spectrum remain low. thus, bis central bankers ’ speeches our monetary policy stance remains accommodative, lending support to economic activity and job creation. as expected, recent economic data indicate some deceleration in the pace of economic growth in the second quarter of 2011. while the underlying momentum of economic growth in the euro area continues to be positive, uncertainty remains elevated. we will continue to monitor very closely all developments with respect to upside risks to price stability. turning to fiscal policies, the current environment is very demanding and requires decisive action. euro area countries must, as a minimum, comply with their fiscal consolidation commitments for 2011 and beyond, as foreseen under the respective excessive deficit procedures. adequate and more frontloaded adjustment should ensure that structural fiscal consolidation targets are met, in line with the ecofin council recommendations, and any better than expected economic and fiscal developments should be exploited to achieve faster deficit reduction. the announcement of fully specified consolidation measures for 2012 and beyond is essential to convince the general public and financial market participants that the corrective policies will be sustained and that public debt developments will be put on a sustainable path. at the same time, it remains essential that substantial and comprehensive structural reforms are urgently implemented in the euro area to strengthen competitiveness, flexibility and longer - term growth potential. this is particularly relevant for countries with high fiscal and external deficits or with past losses in competitiveness. we welcome the introduction of the european semester, including the recent submission of countries ’ national reform programmes that incorporate commitments made under the euro plus pact. we also support the european council conclusions calling for more ambitious and well - defined reforms that should be frontloaded in order to foster competitiveness. in addition, the removal of labour market rigidities would strongly support the adjustment process. measures which enhance wage flexibility, such as the elimination of automatic wage indexation, would help to accomplish the necessary adjustment. we are now at your disposal