reaches full employment. we can think of a decline in inflation expectations as a downward shift in the philipps curve, leading to a lower intercept. clearly, this downward shift in the phillips curve counteracts the reflationary impact that the accommodative monetary policy intends to achieve via the absorption of economic slack ; and the downward impact may, in fact, dominate in certain conditions. in particular, if the relationship between inflation and slack is relatively weak – implying a flat slope of the phillips curve – a given degree of monetary accommodation is less likely to trigger the upward momentum in prices necessary to compensate for falling inflation expectations. as a consequence, actual inflation may decline, even in situations where monetary policy has been successful in reducing slack. the economy may then enter on a self - sustaining spiral : declining inflation expectations shift down the phillips curve, which puts downward pressure on actual inflation, which in turn translates into a further decline in inflation expectations. conclusion let me conclude. decades of experience have confirmed the importance of price stability for macroeconomic stability and sustained economic growth. that is true both when inflation is too high and eggertsson, g. and b. pugsley ( 2006 ), “ the mistake of 1937 : a general equilibrium analysis, ” monetary and economic studies, institute for monetary and economic studies, bank of japan, vol. 24 ( s1 ), pages 151 – 190, december. orphanides, a. and j. williams ( 2004 ), “ imperfect knowledge, inflation expectations, and monetary policy, ” nber chapters, in : the inflation - targeting debate, pages 201 – 246 national bureau of economic research, inc. bis central bankers ’ speeches when it is too low. the prolonged period of low inflation we are in today has increased the risks that inflation misses might become persistent, which would be deeply damaging for the economy. this is why we have reacted so forcefully to secure our objective – and will continue to do so in the future if necessary. to be sure, the crisis has proven that ensuring price stability is not sufficient for sustainable growth. it is only an enabling condition and other policies must also play their part. still, the need for a superior policy mix is no excuse for central banks to be passive when their mandates are under threat. the ecb has demonstrated through its actions that it does not wait for others to move first. bis central bankers ’ speeches

benoit cœure : exchange of views with members of the high council of public finance introductory remarks by mr benoit cœure, member of the executive board of the european central bank, prior to an informal exchange of views with the high council of public finance, paris, 17 july 2019. * * * thank you for inviting me to the high council of public finance. it is a pleasure to engage in an informal exchange of views with you on the monetary policy of the european central bank ( ecb ) and more broadly on economic and monetary union ( emu ), with a specific focus on issues of relevance to fiscal policy. allow me to start by briefly discussing the economic situation of the euro area. the euro area economic outlook the euro area economy grew by 0. 4 %, quarter on quarter, in the first quarter of 2019, following an increase of 0. 2 % in the fourth quarter of 2018. however, incoming economic data and survey information point to somewhat weaker growth in the second and third quarters of this year. this reflects the ongoing weakness in international trade in an environment of prolonged global uncertainties, which are weighing in particular on the manufacturing sector. looking ahead, the euro area expansion will continue to be supported by favourable financing conditions, the mildly expansionary euro area fiscal stance, further employment gains and rising wages, and the ongoing – albeit somewhat slower – growth in global activity. this assessment is broadly reflected in the june 2019 eurosystem staff macroeconomic projections for the euro area, which foresee annual real gdp increasing by 1. 2 % in 2019, 1. 4 % in 2020 and 1. 4 % in 2021. the risks surrounding the euro area growth outlook continue to be tilted to the downside, on account of the prolonged presence of uncertainties related to geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets. according to eurostat ’ s flash estimate, euro area annual hicp inflation was 1. 2 % in june 2019, unchanged from may 2019. based on current futures prices for oil, annual hicp inflation is likely to decline over the coming months. adjusting for the temporary factors behind the recent volatility, measures of underlying inflation remain generally muted. looking further ahead, underlying inflation is expected to increase over the medium term, supported by our monetary policy measures, the ongoing economic expansion and stronger wage growth. this assessment is broadly reflected in the june 2019 eurosystem staff macroeconomic projections for the euro area, which