the first quarter of this year and the most recently published forecasts by public institutions, the risks to this outlook remain broadly balanced. on the downside, there are concerns that the turmoil in financial markets could have a stronger impact on the real economy, as well as that protectionist pressures could intensify and that there could be adverse developments in the world economy stemming from a disorderly correction of global imbalances. at the same time, there may be stronger than anticipated positive effects due to the decrease in commodity prices and to the policy measures taken. annual hicp inflation was, according to eurostat ’ s flash estimate, 0. 6 % in april, unchanged from march. as explained on earlier occasions, the decline in inflation since last summer primarily reflects the sharp fall in global commodity prices over this period. moreover, signs of a more broad - based reduction in inflationary pressure are increasingly emerging. looking ahead, base effects stemming from past energy price movements will play a significant role in the shorter - term dynamics of the hicp. accordingly, we expect to see headline annual inflation rates declining further and temporarily remaining at negative levels for some months around mid - year. thereafter, annual inflation rates are expected to increase again. such short - term dynamics are, however, not relevant from a monetary policy perspective. looking further ahead, hicp inflation is likely to remain positive and below 2 % in 2010, with price developments being dampened by ongoing sluggish demand in the euro area and elsewhere. available indicators of inflation expectations over the medium to longer term remain firmly anchored in line with the governing council ’ s aim of keeping inflation rates at levels below, but close to, 2 % over the medium term. the risks surrounding this outlook are broadly balanced. they relate in particular to the risks to the outlook for economic activity as well as to risks to commodity prices. turning to the monetary analysis, the latest data confirm the continued deceleration in the pace of underlying monetary expansion. this is signalled, for instance, by the concurrent further declines in the annual growth rates of m3 to 5. 1 % and of loans to the private sector to 3. 2 %. the deceleration supports the assessment of diminishing inflationary pressures in the medium term. month - on - month developments in m3 and its components have remained volatile, with data for march showing a contraction in most of the respective outstanding amounts. this may partly reflect market participants ’ investment responses to the past reduction in the key ec

european central bank : press conference – introductory statement introductory statement by mr jean - claude trichet, president of the european central bank and mr lucas papademos, vice - president of the european central bank, frankfurt am main, 7 may 2009. * * * ladies and gentlemen, the vice - president and i are very pleased to welcome you to today ’ s press conference. we will now report on the outcome of today ’ s meeting of the governing council, which was also attended by commissioner almunia. on the basis of its regular economic and monetary analyses, the governing council decided to reduce the interest rate on the main refinancing operations of the eurosystem by a further 25 basis points and the rate on the marginal lending facility by 50 basis points, to 1. 00 % and 1. 75 % respectively. the interest rate on the deposit facility will remain unchanged at 0. 25 %. this decision brings the total reduction in the interest rate on the main refinancing operations of the eurosystem since 8 october 2008 to 325 basis points. current key ecb interest rates are appropriate taking into account all available information and analysis. in addition to the reductions in interest rates, the governing council decided today to proceed with its enhanced credit support approach. in continuity and consistency with the operations we have undertaken since october 2008, and in recognition of the central role played by the banking system in financing the euro area economy, we will conduct liquidity - providing longer - term refinancing operations with a maturity of 12 months. the operations will be conducted as fixed rate tender procedures with full allotment. the rate for the first of these operations, to be announced on 23 june 2009, will be the rate on the main refinancing operations at that time. subsequently, the fixed rate may include a premium to the rate on the main refinancing operations, depending on the circumstances at the time. the governing council has decided in principle that the eurosystem will purchase eurodenominated covered bonds issued in the euro area. the detailed modalities will be announced after the governing council meeting of 4 june 2009. furthermore, the governing council has decided that the european investment bank will become an eligible counterparty in the eurosystem ’ s monetary policy operations with effect from 8 july 2009 and under the same conditions as any other counterparty. these decisions have been taken to promote the ongoing decline in money market term rates, to encourage banks to maintain and expand their