reforms which foster a sound balance between savings and investment in all major partner countries, which enhance the production potential in the euro area and which support a further expansion in trade of goods and services at the global level. turning to price developments, we have seen a fall in the hicp inflation rate for december to 2. 0 %. the same rate was estimated by eurostat for january. in the course of this year, inflation rates should fall below 2 % and remain in line with price stability thereafter. while us dollar - denominated global commodity prices have been on an upward trend over recent months, the past appreciation of the euro is dampening their effects on domestic prices. moreover, we continue to expect wage developments to remain moderate in the context of high rates of unemployment and a gradual economic recovery. recent data on labour costs seem to broadly confirm the assessment of a levelling - off of wage increases. on the whole, inflationary pressure remains limited - an assessment that is confirmed by all available forecasts. given the conditional nature of any forward - looking evaluation, it is of course important to bear in mind all elements of risk to the outlook for price stability and to monitor inflation expectations closely. turning to the monetary analysis, annual m3 growth has continued to moderate slowly over recent months. this can be explained by the still cautious reallocation of portfolios by economic agents and the effects of generally low interest rates on the growth of very liquid assets. at the same time, the growth of loans to the private sector reflects the effects of both low interest rates and an improvement in the economic environment. the strong monetary growth over the past few years means that there is significantly more liquidity available in the euro area than needed to finance non - inflationary growth. whether or not the accumulated excess liquidity will translate into inflationary pressures over the medium term depends on the extent to which past portfolios shifts are reversed and on the future strength of economic growth. should excess liquidity persist, it could lead to inflationary pressures over the medium term. in summary, the economic analysis continues to indicate that the main scenario for price developments in the medium term is in line with price stability. cross - checking with the monetary analysis does not alter this picture. with regard to fiscal policies, there are several important issues that warrant close attention. first, the implementation of fiscal policies should be in line with the commitments made late last year. in this connection, a thorough assessment of the new stability programmes of member states is currently

christine lagarde : hearing at the committee on economic and monetary affairs of the european parliament introductory statement ( via videoconference ) by ms christine lagarde, president of the european central bank, before the hearing at the committee on economic and monetary affairs of the european parliament, frankfurt am main, 18 march 2021. * * * madam chair, honourable members of the economic and monetary affairs committee, ladies and gentlemen, i am very happy to appear again before the committee in our first regular hearing this year. today marks the one - year anniversary of the extraordinary governing council meeting during which we decided to launch the pandemic emergency purchase programme ( pepp ). standing where we are today, the economic situation looks brighter now than it did back then and we can expect it to improve over 2021. in the short term, however, the economic outlook for the euro area remains surrounded by uncertainty due to the dynamics of the pandemic and the speed of vaccination campaigns. the severe impact that the pandemic continues to have on not just the economy, but on all aspects of the lives of many europeans, does not allow us to “ celebrate ” the anniversary of the pepp. it is nevertheless important to look back and proudly acknowledge our collective efforts in shielding european citizens from even worse outcomes. in my remarks today, i will focus on the euro area economic outlook and the ecb ’ s monetary policy stance in the light of the governing council ’ s decisions taken on thursday of last week. i will conclude by discussing the policy mix required to secure a solid path to economic recovery. the current macroeconomic outlook the rebound in global demand and additional fiscal measures are supporting global and euro area activity. at the same time, persistently high coronavirus ( covid - 19 ) infection rates, the spread of virus mutations, and the associated extension and tightening of containment measures continue to have a negative impact on euro area economic activity. as a result, real gross domestic product ( gdp ) is likely to contract again in the first quarter of the year after declining by 0. 7 per cent in the fourth quarter of 2020. looking ahead, the ongoing vaccination campaigns, together with the gradual relaxation of containment measures underpin expectation of a firm rebound in economic activity in the second half of 2021. over the medium term, we expect the recovery in demand, as containment measures are lifted, to be supported by favourable financing conditions, and an expansionary fiscal stance. this assessment is also reflected in the