iv ) as a fourth feature, economic integration and convergence is also reflected in the fact that current inflation and output growth differences among euro area countries are relatively limited by historical standards. the differences also appear to be similar to those observed across regions or states within the united states. 7 i understand that some observers may like to create headline news from the differences in economic growth or inflation between some euro area countries in a specific quarter or year. but let me stress that it is absolutely normal in a monetary union, such as the euro area, for economic developments to differ across individual regions. this is also the case among regions in the united states. why is it normal? first, differences in growth rates and inflation may be related to catching - up phenomena. a region which is relatively underdeveloped would, if not hindered by bad economic policies, be expected to grow at a rate above the currency area average and thus, over time, reach an income per capita level similar to the currency area as a whole. this process is highly welcome. second, there are countries that are more advanced, in terms of structural reforms, than others and have therefore a higher growth potential. third, a country or region might also be exposed to country or regionspecific shocks. this specific shock may cause a growth or inflation differential, which is also normal in any monetary union. however, it is also true that persistent differentials which reflect structural rigidities are a concern. i will address this issue later. v ) equally relevant for the conduct of the single monetary policy of the ecb is the fifth and final feature of economic integration i would like to mention to you. the degree of synchronisation or co - movement between the different cyclical positions across the euro area countries seems to have increased since the beginning of the 1990s. in other words, a large number of euro area economies now share similar business cycles. 9 the increased co - movement of business cycles across the euro area economies has resulted from a continuous process of integration. the move from several currencies to a single currency has meant the elimination of exchange rate risk between countries in the euro area. the euro has also reduced information costs and has enhanced price transparency. this, in turn, has fostered competition and market integration. in this way, the adoption of the euro has acted as a catalyst for the single market, within which goods, services, people and capital are to move freely. ludwig erhard said “ a free market can

the formation of expectations. through the filter of these two questions, i would like to use my remarks this morning to discuss the forthcoming decisions facing the governing council. the anatomy of disinflation low inflation is not particular to the euro area. inflation is low across advanced economies, mainly due to the diminishing effect of oil prices on consumer prices. but looking at the anatomy of inflation, there are two factors specific to the euro area that contribute to especially low inflation here. the first is a common factor : the rise in the euro exchange rate and its effect on the price of internationally traded commodities. the second is a local factor : the process of relative price adjustment in certain euro area countries that pulls down aggregate inflation. let me explain each of these in turn. common factors falling commodity prices explain the lion ’ s share of the disinflation the euro area has experienced since the end of 2011. brent crude oil prices were down by around 7 % in euro terms in the first quarter of this year, compared with a year earlier. food prices were sharply down as well. in fact, these two components have together accounted for around 80 % of the decline in euro area hicp inflation since late 2011. the bulk of the imported downside pressures on euro area consumer prices are explained by the strengthening of the effective euro exchange rate, in particular vis - a - vis the dollar. in the past year or so, oil prices in us dollars have fluctuated – by historical standards – over a relatively narrow range. and they have exhibited no clear downward or upward trend. this creates a balance of forces that might affect future inflation. on the one hand, lower commodity prices driven by euro appreciation help compensate for the generally weak developments in disposable income in the euro area. indeed, real disposable income declined at slower pace throughout 2013, and turned slightly positive in the fourth quarter, increasing by 0. 6 % year - on - year. to the extent that this supports domestic demand in the euro area it will also create upward pressure on inflation. bis central bankers ’ speeches on the other hand, exchange rate appreciation affects external demand and reduces the competitiveness gains of price and cost adjustment in some euro area countries. this has a countervailing effect on real disposable incomes, while also making disinflation more broadbased. indeed, if we look at prices of non - energy industrial goods, which are mainly tradable, we see a downward trend