slack falls, inflation will gradually accelerate further to 1. 6 % in 2018. although the euro area recovery is showing signs of resilience, material downside risks remain, mainly stemming from the external environment and significant uncertainties following the outcome of the uk referendum. moreover, our baseline scenario for growth and inflation in the euro area remains crucially dependent on the current supportive financing conditions staying in place. therefore, we will ensure that monetary policy continues to play its role in facilitating the cyclical recovery. by ensuring accommodative financing conditions that buoy demand, monetary policy is helping to raise output back to its potential level and ultimately secures inflation to return to levels below, but close to, 2 %. we remain fully committed to preserving the very substantial amount of monetary accommodation which is necessary to secure a sustained convergence of inflation towards our inflation aim and stand ready to act, if warranted, to achieve our price stability objective by using all the instruments available within our mandate. to this end, at our policy meeting in early december, we will be in a good position to take a comprehensive perspective on the inflation outlook, our progress made in achieving a sustained adjustment and the monetary policy stance, benefitting from incoming data and survey information, the new staff macroeconomic projections as well as the work of the eurosystem committees on options to ensure a smooth implementation of our purchase programme until march 2017, or beyond, if needed. nevertheless, potential growth in the euro area is low after years of decline, while structural unemployment remains high. the european commission estimates that the potential growth rate of the euro area economy this year is just 1 %, half that of the united states. 5 low potential growth casts a shadow over the long - run economic prospects for the euro area, creating a negative feedback loop. because low potential growth dampens expectations of future income, it curbs consumption and investment today, which further lowers rates of potential growth tomorrow. this can lead to a permanent destruction of productive capacity, including 2 / 3 bis central bankers'speeches jobs. 6 it is therefore imperative that decisive action is taken now in order to propel the on - going cyclical recovery into a structural recovery. long - run growth depends on the efficiency with which resources are allocated, the ease of doing business, the incentives for investment and confidence in public institutions. making strides in these areas requires structural reforms aimed at supporting investment, enhancing productivity and increasing flexibility in the markets for labour, goods and services. structural reforms will

peter praet : the euro area economy, monetary policy and structural reforms remarks by mr peter praet, member of the executive board of the european central bank, at the observatory group roundtable, new york city, 18 november 2016. * * * today i will give you an assessment of the euro area economy and share some thoughts on where i see us heading and on what is needed to ensure long - run sustainable growth. 1 on a positive note, we have good indications that the euro area economy is heading for a continued moderate, but steady recovery, which seems to have become resilient to global economic and political uncertainty. real gdp growth has expanded for the 14th consecutive quarter, growing by 0. 3 %, quarter - on - quarter, during the third quarter according to the flash estimate. the latest incoming economic indicators continue to point to similar growth rates for the coming quarters. although global uncertainties continue to weigh on the outlook for foreign demand and could thereby dampen export growth, robust domestic demand should partly counteract the negative impact on growth stemming from the external environment. solid domestic demand is anticipated to remain the driving force behind real gdp growth. consumption expenditure is expected to grow strongly this year and to remain buoyant thereafter. most notably, consumption is boosted by improving labour market conditions, with unemployment falling steadily despite a rise in participation. these improvements support the consumption expenditure of both existing employees, who are reassured of their earnings prospects, as well as new employees. moreover, euro area consumers are still benefitting from higher real disposable incomes, reflecting past declines in oil prices. business investment is also expected to continue recovering amid support from a number of factors, such as improvements in corporate profitability and a need to modernise the capital stock after years of low investment and physical depreciation. all these developments, of course, are gaining significant support from the effective pass - through of our accommodative monetary policy measures. taken together, our measures have led to a significant and broad - based easing in financing conditions for euro area firms and households, which bolsters consumption and investment expenditure. in terms of financing costs, since the beginning of june 2014, bank lending rates for euro area households and nfcs have fallen sharply, with even more pronounced declines for small and medium - sized enterprises ( smes ). corporate bond yields have fallen significantly, too, amid support from the corporate sector purchase programme ( cspp ), which began in june of this year