forecast for this year to 0. 6 %. slide 6. wage growth is moderating in the euro area the euro area unemployment rate has remained at a record low and employment has increased, even though growth has been at a standstill since the end of 2022. this said, there are indications that labour demand is now adjusting downwards. recent euro area wage growth has been developing broadly in line with our expectations, slowing from 5 % to 4 %. importantly, a key driver of wage growth has been past inflation surprises rather than higher inflation expectations. 2 / 4 bis - central bankers'speeches slide 7. inflation expectations remain well anchored to the target inflation expectations have in fact been well anchored at around our 2 % target, as can be seen from this slide. referring to the ongoing weak demand conditions in the euro area, and in the spirit of the multilateral imf and world bank spring meetings this week, i would like to draw your attention to the developments in the euro area current account. in the march projections, the forecast for the current account surplus was revised significantly upwards, from 1 % to 3. 2 % of gdp for the current year and similarly for the two following years. as we know, the current account can be defined as the difference between investment and savings. this definition provides a useful viewpoint when assessing the effects of recent monetary policy tightening and its strong transmission. an increase in the current account surplus may reflect a lower level of investment or higher level of savings – or both, which seems to be the case in the euro area currently. an important factor contributing to a higher euro area current account is the low level of business and housing investment, which are expected to be very weak this year. this is reflected in the weak credit demand due to higher interest rates and also somewhat tighter credit supply. as bank profitability is not expected to remain as strong as before and credit risks are increasing somewhat, the supply factors may start to play a bigger role in credit extension, while credit demand is expected to start recovering. if weaker investments are contributing to a stronger current account, so too are higher savings. the savings rate increased to 14. 6 %, which is clearly above the pre - pandemic 13 %. of course, tighter monetary policy and higher interest rates play a major role in explaining the higher savings rate. however, uncertainty and low confidence also incentivise higher savings. the continuation of the russian war has probably had more complex and wide - ranging effects on confidence and

was perceived as asymmetric, effectively setting a 2 % ceiling for inflation. this asymmetry very likely contributed to lowering inflation expectations and thereby inflation itself. the new symmetric inflation target is expected to influence long - term inflation expectations and to anchor them more solidly to the 2 % inflation target. when we published our new symmetric inflation target in july 2021, the operating environment for monetary policy was changing dramatically. slide 5. inflation is converging towards the ecb's 2 % target the supply shocks, caused first by the pandemic and then by russia's unjustified and brutal war in ukraine, pushed the euro area inflation rate above 2. 5 % for the first time in nine years by the fall of 2021, and then all the way up to 10. 6 % in october 2022. thanks to the normalisation of energy prices and the determined but very consistent monetary tightening, euro area hicp inflation is now at 2. 4 %. it is expected to decline further, reaching our inflation target next year. when i addressed this forum a year and a half ago, in october 2022, the uncertainty related to energy supply in europe was extreme. rationing of energy supplies was widely discussed. so were the various risk scenarios, some containing severe stagflationary tendencies. at the time, energy was the key driver of euro area inflation, while moderate wage inflation was acting as an anchor. subsequently, europe reacted decisively and cut the energy crisis short. today, wages have replaced energy as the main inflation driver – but wage growth is now moderating and inflation declining. due to the energy price assumptions, our inflation forecasts overestimated actual inflation in the fourth quarter last year. for this year, our assumptions and inflation forecasts have been more accurate, although in march we did revise down our inflation forecast for this year to 2. 3 %. in september last year, our 2024 inflation forecast was at 3. 2 %, so we have in fact been approaching our target faster than we had expected at the time we raised the policy rate to the current level. however, disinflation is more than just a story of the reversal in energy price movements. monetary policy has played an important role in dampening demand since the rate hiking cycle started in july 2022. monetary restraint is continuing to reduce inflation and impact the real economy strongly, affecting the growth outlook, particularly for this year. in march, we also revised down our growth