mario draghi : imfc statement statement by mr mario draghi, president of the european central bank, at the thirty - eighth meeting of the international monetary and financial committee, bali, indonesia, 12 october 2018. * * * the euro area economy continues to expand in a broad - based manner, across countries and sectors, despite some moderation following its strong growth in 2017. the economy grew by 2. 1 % year - on - year in the second quarter of this year. it continues to exhibit a high level of capacity utilisation, and labour markets are tightening in several countries and sectors. the unemployment rate in the euro area has dropped to its lowest level since 2008, and the number of people in employment has increased by more than nine million since mid - 2013. the latest economic indicators suggest that, overall, this broad - based growth in the euro area will continue. our monetary policy measures continue to underpin domestic demand, which remains the mainstay of the ongoing expansion. private consumption is being supported by employment gains and rising wages. business investment has strengthened amid improvements in corporate profitability, favourable financing conditions and solid demand. in addition, the expansion in global activity is expected to continue, benefiting euro area exports. the latest ecb staff projections put annual real gdp growth at 2. 0 % in 2018, 1. 8 % in 2019 and 1. 7 % in 2020. at the same time, uncertainties relating to rising protectionism, vulnerabilities in emerging markets and financial market volatility have gained more prominence recently. headline inflation in the euro area has lately been hovering around 2. 0 %, somewhat higher than the levels observed in the first months of this year, mainly reflecting a higher annual rate of change in energy prices. while measures of underlying inflation remain generally muted, they have been increasing from earlier lows. uncertainty around the inflation outlook is receding. looking ahead, underlying inflation is expected to pick up towards the end of the year and then increase gradually over the medium term, supported by our monetary policy measures, the continuing economic expansion and rising wage growth. the latest ecb staff projections foresee annual euro area headline inflation at 1. 7 % in 2018, 2019 and 2020. overall, recent developments vindicate the governing council ’ s earlier assessments of the medium - term inflation outlook. incoming information continues to support our confidence that the sustained convergence of inflation to levels below, but close to, 2 % will proceed, and will be maintained even

after a gradual winding - down of our net asset purchases. accordingly, at its last monetary policy meeting the governing council confirmed that it continues to expect the key ecb interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 % over the medium term. the governing council also decided to reduce the monthly pace of the net purchases under the asset purchase programme ( app ) to €15 billion from october until the end of december 2018 and anticipated that, subject to incoming data confirming our medium - term inflation outlook, net purchases will then end. finally, the governing council also confirmed its intention to reinvest the principal payments from maturing securities purchased under the app for an extended period of time after the end of our net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. significant monetary policy stimulus is still needed to support the further build - up of domestic price pressures and headline inflation developments over the medium term. this support will continue to be provided by the net asset purchases until the end of the year, by the sizeable stock of acquired assets and the associated reinvestments, and by our enhanced forward guidance on the key ecb interest rates. in any event, the governing council stands ready to 1 / 3 bis central bankers'speeches adjust all of its instruments as appropriate to ensure that inflation continues to move towards the governing council ’ s inflation aim in a sustained manner. the financial health of the euro area banking sector has continued to improve. although showing a slight decrease from 14. 6 % at the end of 2017, the aggregate common equity tier 1 ratio of euro area significant institutions stood at 14. 1 % at the end of the first quarter of 2018. banks have made progress in reducing their stocks of non - performing loans ( npls ). in the first quarter of 2018, the npl ratio for euro area significant institutions dropped further, to 4. 8 %, compared with 5. 9 % a year earlier. however, euro area banks ’ profitability remains subdued. the average return on equity of euro area significant institutions declined to 6. 6 % in the first quarter of 2018, from 7. 1 % a year earlier. in this context, eu and national authorities are still following up on a comprehensive action plan for dealing with legacy asset quality issues