, is expected to provide positive impetus to growth over the next two years. furthermore, demand for exports should benefit from the on - going global recovery, and should thereby reinforce the growth momentum in the euro area. although labour markets have shown some signs of improvement, unemployment remains high in the euro area. unutilised capacity continues to be sizeable. moreover, credit growth to the private sector remains subdued, and the necessary adjustment of balance sheets in the public and private sectors will probably continue to dampen the pace of recovery. the risks surrounding the economic outlook remain on the downside. geopolitical risks, as well as developments in both emerging market economies and global financial markets, may have a negative effect on economic conditions in the euro area, through their impact on energy prices and global demand for euro area products. further downside risks include an bis central bankers ’ speeches inadequate implementation of structural reforms in the member states and weaker than expected domestic demand. looking at price developments, we see that euro area hicp inflation declined sharply from late 2011 to october last year, and has since been fluctuating around very low levels below 1 %. according to the latest data ( eurostat ’ s flash estimate ), euro area annual hicp inflation stood at 0. 5 % in june 2014, unchanged from may. annual hicp inflation is expected to remain at low levels over coming months, before increasing gradually in 2015 and 2016. at the same time, medium to long - term inflation expectations remain firmly anchored in line with price stability. upside and downside risks to the outlook for price developments are both seen as limited and broadly balanced over the medium term. we will monitor the possible repercussions of geopolitical risks and exchange rate developments closely in this context. the exchange rate is not a policy target for the ecb. nevertheless, the exchange rate remains an important driver of future inflation in the euro area. certainly, the appreciation that took place since mid - 2012 had an impact on price stability. in the present context, an appreciated exchange rate is a risk to the sustainability of the recovery. recent monetary policy measures let me now move to explaining our monetary policy stance. we decided on a number of monetary policy measures in early june. these measures are aimed at providing additional monetary policy accommodation by supporting lending to the real economy. in line with our price stability mandate, these decisions are an essential contribution to bringing inflation rates closer to 2 %. they will also contribute to a further strengthening of the

recovery. • specifically, we lowered all key interest rates further. our main refinancing rate now stands at 0. 15 %. accordingly, our deposit facility rate has been cut to a negative level and now stands at – 0. 10 %. • we will conduct targeted longer - term refinancing operations ( tltros ) as of september 2014. in these operations, banks will be entitled to borrow from the eurosystem, conditional on their lending to the private non - financial sector, with loans to households for house purchase being excluded. • in addition, we are intensifying our work in preparation of possible outright purchases in the market for asset - backed securities ( abss ). • furthermore, we also decided that at least until the end of 2016, we will continue to fully meet the demand of banks for liquidity in our refinancing operations – of course, against adequate collateral. • finally, we have suspended the weekly operations to absorb the liquidity injected under the securities markets programme. we took these decisions to enable our accommodative monetary policy stance to better feed through to the wider economy. weak credit growth in the euro area, particularly to small businesses, has been a major headwind for the recovery. indirectly, it has been a continuous drag on inflation over the recent past. in fact, despite significant reductions in policy interest rates and, overall, more contained macroeconomic risks, bank - intermediated credit growth remains subdued and lending rates for small businesses are well above the levels usually observed in similar phases of the business cycle. to address this challenge, our tltros are tailored to incentivise bank lending to the real economy in the euro area. the tltros will provide long - term funding to participating banks. this should ease their financing costs, allowing banks to pass on such attractive conditions bis central bankers ’ speeches to their customers. this will ease credit conditions and stimulate credit creation. moreover, the growth of our balance sheet as a result of a significant take - up in our tltros will put downward pressure on interest rates in the money markets. this will contribute further to lowering the banking sector ’ s funding costs. however, the tltros will not merely provide long - term funding. the tltros are targeted operations : the stronger the flows of new net lending to non - financial corporations and consumers ( relative to a specified benchmark ), the higher the amount that banks will be permitted to borrow from the