2009. procyclicality in the current context, financial stability risks interact with the issue of procyclicality. the failure of the traditional phillips curve relation between the business cycle and inflation to thus far assert itself makes monetary policy increasingly procyclical. economic growth in the euro area passed its cyclical trough in the first quarter of 2013, while core inflation bottomed out early 2015. yet until at least september 2018 the app will be adding stimulus. not only in terms of length, but also in terms of magnitude of the expansion, the economy is in outstanding shape. with real gdp growth hitting levels above 2 % year - onyear, the monetary policy stance is increasingly out of sync with the business cycle. chart 3 : euro area business cycle and monetary policy decisions euro area business cycle and monetary policy decisions pmi number on y - axis, with 50 marking difference between business cycle expansion and contraction 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 mean of pmi + / - ½ standard deviation composite purchasing managers ’ index ( pmi ) index policy easing ( rate decrease or app decision / expansion ) policy tightening ( rate increase ) a simple historical comparison serves to illustrate this point. chart 3 shows that during previous upturns, that is when the euro area composite purchasing managers ’ index ( pmi ) stood at similar levels above its long - term mean, policy was generally tightening instead of the current prolonged easing. 8 obviously, the main factor underlying this contrasting pattern is the weak and elusive character of the traditional phillips curve relationship between cyclical conditions and inflation. whether this is merely a temporary or a more permanent phenomenon is a topic for ongoing debate. my colleague mark carney, for example, has recently argued that “ globalisation has been accompanied by a weakening in the relationship between domestic slack and domestic inflation, and by a corresponding strengthening between global forces and domestic prices ” 9. also in the euro area, the strong recovery of the labour market has yet to translate into upward pressure on wages and prices. communication patience is therefore needed for our monetary stimulus to unfold. the reflating economy will ultimately translate into increased pressure on wages and prices. this may however take time. central banks can only affect the price level with “ long and uncertain lags ”. consequently they cannot be over - ambitious and try to steer price developments in the short run, nor should they seek to precisely define the horizon of their action. 10 as we intend

sine qua non. and that is that governments create investment conditions that improve the business case for climate investments. they need to do this for both companies in need of green finance and investors providing green finance. if demand and supply grow in the same pace we reduce the risk of a green bubble once the private sector increases its green investments. and to reduce the risk of greenwashing, we need international standards such as a taxonomy. 1 / 4 bis central bankers'speeches our governments ’ broad mandates allow them to create favourable conditions for green investments – and so they should act upon it. meanwhile, of course, central banks should do what they can within their mandates and continue to work on favourable financing conditions. but i want to stress that, given their broader mandate, our governments are the primary actors in greening our economies. i will now elaborate on three ways governments could step up their efforts. after that, i will talk about the role of supervisors and central banks in greening our economies. so first – governments need to address the issue of under - priced carbon emissions. this will improve the business case for climate investments. with the emissions trading system, the ets, european leaders have a powerful tool to do this and achieve the target of reducing net eu greenhouse gas emissions by 55 percent by 2030. second – investment uncertainty, which is usually high for innovative green investments, needs to be reduced. and governments could contribute to this with a consistent and reliable policy mix of subsidies, co - financing and guarantees. a good example are offshore wind farms in the netherlands : minimum price guarantees helped the industry scale - up, after which costs fell sharply. the european commission can stimulate public - private partnerships by simplifying government support rules. they can also do so by granting exemptions for the co - financing of climate investment by governments. third – corporate reporting of sustainability data must improve, in terms of quality, comparability and consistency. and this credible and comparable information should be readily available for all market participants, shareholders and other stakeholders across the world. that is why i encourage authorities to support the ifrs foundation in developing a global baseline standard. one that is, first, compatible with regional and national disclosure frameworks that may be more far - reaching ; and two, builds upon the recommendations of the task force on climate - related disclosures. until the ifrs reporting standards have been developed, it is important we avoid fragmentation. we need to ensure that national and regional requirements currently being put