euro appreciation since the first quarter of 2012 explains a reduction of 0. 5pp in our inflation rate. this is connected with the fact that energy and food prices account for 80 % of the overall decline in hicp inflation since that date. another part reflects the process of internal devaluation to regain price competitiveness in some euro area countries. domestic inflation excluding food and energy has fallen well below the euro area average. the recent fall in services price inflation in the euro area, for example, is almost entirely accounted for by stressed euro area member states. nonetheless, we are not complacent about the risks from a protracted period of low inflation. to date, we see no distinct signs of deflation and economic agents are not postponing purchases. but we recognise that, if too prolonged, periods of low or negative inflation could unleash forces that may affect the outlook, by destabilising inflation expectations and aggravating the burden of the debt overhang of both governments and households. given these concerns, the ecb governing council has reaffirmed forward guidance and stressed its readiness to act with other measures if required. conclusions let me conclude. a session entitled “ global challenges ” can quickly nudge the speaker towards a rather pessimistic view, seeing only obstacles and impediments to a sustainable recovery path. but we should not let that happen. of course, the recovery remains fragile and risks loom large. but the global outlook has begun to improve. whether it is managing the exit from unconventional monetary policies, addressing structural challenges, completing the according to european commission estimates. ceps “ the global economy in 2030 : trends and strategies for europe ”, april 2014. bis central bankers ’ speeches repair of the banking system or responding to too low inflation, policy makers know their agenda and are taking action. euro area authorities are doing their part. significant progress has been made towards banking union and in enacting structural reforms to restore competitiveness – although more remains to be done. at the ecb, we are ready to act to avoid low inflation becoming entrenched in a way that would destabilise the outlook for growth. bis central bankers ’ speeches

council raised the key ecb interest rates by 25 basis points in april, in order to adjust the very accommodative monetary policy stance in the light of upside risks to price stability. since then we have kept the rates unchanged. at the same time, as i said in the press conference after the last governing council, we see the monetary policy stance as still accommodative and risks to price stability on the upside. accordingly, i said that we are in a state of strong vigilance and that we stand ready to act in a firm and timely manner to avoid that recent price developments give rise to broad - based inflationary pressures over the medium term. as regards our non - standard measures, the governing council earlier this month decided to maintain its fixed rate tender procedures with full allotment in its refinancing operations up to the third quarter of 2011. ii. fiscal consolidation and monetary policy let me now turn to the topic of fiscal consolidation and monetary policy. in a monetary union, the central bank when setting interest rates has to take an area - wide perspective. in the same manner the us federal reserve do not and cannot tailor its interest rate to the specific economic conditions in individual us states. setting the policy rate with a clear focus on the euro area as a whole does not, however, mean ignoring the diversity in financial conditions. since the financial crisis erupted, the ecb has adopted a number of non - standard measures to foster as much as possible a smooth functioning of the monetary policy transmission throughout the euro area. the current major challenges faced by a few euro area countries are mainly the result of some governments not conducting sound policies and not implementing reforms that would benefit their citizens and the european public as a whole. it is essential that euro area countries fully assume the responsibilities at the national level that derive from their participation in the euro area. past experiences of fiscal consolidation episodes demonstrate the long - term benefits of reducing sizeable fiscal imbalances. there are at least three reasons why well - designed fiscal consolidation is beneficial in the current circumstances. accompanied by appropriate structural reforms, it promotes long - term growth. for those economies with large fiscal imbalances, it is indispensable to bolster confidence. and for all economies it helps create buffers that would be essential to deal with unforeseen events. bis central bankers ’ speeches it is also for this reason that the ongoing negotiations on the governance package should produce an ambitious outcome. i have been emphasis