should further support the euro area recovery. as for price developments, after hovering at levels well below 1 % for three years, with occasional dips into negative territory, euro area headline inflation has again edged higher towards the end of last year. headline inflation – slightly down from may – stands at 1. 3 % in june, according to eurostat ’ s flash estimate. the decrease mainly reflects a decline in energy inflation and to a smaller extent, food inflation, which more than offset an increase in hicp inflation excluding food and energy. underlying inflation – which relates more to domestic price pressures – continues to remain subdued, as unutilised resources still weigh on wage and price growth. in fact, the annual rate of hicp inflation excluding food and energy has mostly remained below, or around, 1 % since late 2013. today, an important element keeping underlying price pressures subdued is muted wage dynamics, which are shaped by many factors. besides weak productivity developments, the significant degree of remaining labour market slack acts to contain wage growth. when assessing slack, it can prove useful to also look at broader measures than the unemployment rate. the so - called “ u6 measure ” captures unemployment, underemployment ( meaning workers who would like to work more hours ) and marginal attachment, namely those workers that are not competing very actively in the labour market, e. g. because they are not available to start a new job on short notice. this measure currently covers 18 % of the labour force in the euro area, and is thus considerably higher than the unemployment rate. 5 furthermore, the process of setting wages is to some extent backward - looking in a number of euro area countries, reflecting formal and informal indexation mechanisms. 6 overall, we are certainly seeing a firming, broadening and more resilient economic recovery. the economic upturn seems to have gathered some further momentum. real activity is expanding more strongly than previously expected and risks to the growth outlook are now broadly balanced. this clearly puts our confidence in the recovery on a stronger footing and has made very adverse scenarios for the inflation outlook less likely, in particular as deflation risks have largely vanished. as a consequence of this change in the risk assessment, the governing council decided to remove its reference to lower interest rates from its forward guidance on policy rates at the meeting in june. 2 / 3 bis central bankers'speeches as the economic prospects brighten, higher expected returns on business investment will make borrowing conditions increasingly attractive. this, as

peter praet : europe ’ s economic recovery and implications for monetary policy remarks by mr peter praet, member of the executive board of the european central bank, at the international conference of commercial bank economists ( iccbe ) in france, paris, 6 july 2017. * * * since june 2014, the ecb has introduced a range of unconventional measures, alongside our conventional ones, in pursuit of its price stability objective. together, these measures have proved to be extremely effective in preventing a period of disinflation from spiralling into one of deflation. nearly three years on, the risks of deflation have vanished and the transmission of our policy measures to the real economy is clearly evidenced by the recovery, which has gathered some further momentum recently. before turning to price developments and monetary policy, let me say a bit more about the latest economic developments in the euro area. the solid upswing continues to broaden across sectors and countries. real gdp in the euro area has expanded for 16 consecutive quarters, growing by 1. 9 % year - on - year during the first quarter of 2017, according to eurostat. this compares with the latest potential growth estimates for the euro area of just over 1 %. 1 moreover, recent survey data point to a strong start to the second quarter. for example, the composite output purchasing managers ’ index – which is strongly correlated with growth in the euro area – remains close to six - year highs in june. the forward - looking components of the survey continue to point to growth in the quarters ahead. moreover, economic sentiment is at its highest level in nearly a decade and has increased notably from may to june 2017. 2 unemployment is at its lowest level in eight years. looking ahead, the latest eurosystem staff macroeconomic projections point to a continued economic expansion at a somewhat faster pace than previously expected. the breadth of the economic recovery is also notable. the dispersion of growth rates across both countries and sectors is at its lowest level in two decades, reflecting a convergence of growth rates around higher levels. this is reassuring for the growth outlook because recoveries tend to be firmer and more robust when they are broad - based. it ’ s a similar picture for employment, with dispersion of employment growth rates across euro area countries at its lowest level on record. the increasingly solid cyclical recovery reflects the success of our monetary policy measures, which have worked their way through the financial system and led to a significant easing of financing conditions for consumers