consumption dynamics. with regards to inflation, euro area annual hicp inflation was 1. 2 % in may 2019, after 1. 7 % in april, reflecting mainly lower energy and services price inflation. on the basis of current futures prices for oil, headline inflation is likely to decline over the coming months, before rising again towards the end of year. measures of underlying inflation remain rather muted, having moved largely sideways over recent months. at the same time, inflation dynamics are supported by strengthening labour cost pressures amid high levels of capacity utilisation and tightening labour markets. in fact, recent data on negotiated wages point towards a continuation in the upward trend in wage growth, which is expected to gradually push up underlying inflation. market based measures of long term inflation expectations have further declined, while surveybased measures have remained stable. the probability of deflation implied by options markets remains low and continues to suggest that deflation risks remain contained. yet, market - based measures of inflation expectations point to a prolonged period or low inflation, indicating only a very gradual return to levels close to, but below 2 %. nevertheless, survey - based measures of inflation expectations have remained anchored. this assessment is also broadly reflected in the latest june 2019 eurosystem staff projections, which foresee inflation at 1. 3 % for 2019, 1. 4 % for 2020, and 1. 6 % for 2021. compared with the march 2019 ecb staff macroeconomic projections, the outlook for hicp inflation has been revised slightly up for 2019 and revised slightly down for 2020. annual hicp inflation excluding energy and food is expected to be 1. 1 % in 2019, 1. 4 % in 2020 and 1. 6 % in 2021. the monetary policy stance against this overall background, the governing council took a number of monetary policy decisions at its recent meeting in vilnius in early june. first, the governing council decided to adjust its forward guidance on the key ecb interest rates. we now expect these to remain at their present levels at least through the first half of 2 / 4 bis central bankers'speeches 2020, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 % over the medium term. this formulation consists of two parts. there is a date - based element – that interest rates are expected to remain at their present levels “ at least through the first half of 2020 ”. and there is a state - contingent element – that rates will

luis de guindos : the euro area economy and our monetary policy stance remarks by mr luis de guindos, vice - president of the european central bank, during the instituto de empresa ( ie ) business leadership forum at the ie business school, madrid, 10 june 2019. * * * recent economic developments despite the somewhat better than expected data for the first quarter, in part due to temporary factors, the most recent information indicates that global headwinds continue to weigh on the euro area outlook. in particular, world trade remains subdued due to rising trade tensions and the global growth momentum has slowed somewhat, mainly on account of the weakness in manufacturing. moreover, downside risks have increased on account of the re - escalated trade dispute between the us and china. also, uncertainty surrounding brexit is prolonged and fragilities in emerging market economies remain. while inflation is expected to rise gradually due to tightening labour markets and rising wages, current dynamics of underlying inflation remain muted. it is against this background, that the governing council decided a number of policy measures at its last meeting, including an extension of its forward guidance on policy interest rates, a confirmation of the reinvestment policy and favourable pricing conditions for our new series of targeted longer term refinancing operations ( tltro iii ). euro area real gdp growth came in at 0. 4 % quarter - on - quarter in the first quarter of 2019, surprising somewhat on the upside. the better than expected outcome was in part driven by temporary factors, such as the mild weather supporting a pick - up in construction and some sector specific developments. economic indicators suggest that domestic demand remains resilient, as signalled by the growth of consumption, which grew 0. 5 % quarter - on - quarter in the first quarter of the year, and investment, which grew by 1. 1 % during the same period. while first quarter growth was somewhat stronger than previously anticipated, incoming data and survey information point to somewhat more moderate growth over the next few quarters. this reflects the ongoing weakness in international trade in an environment of prolonged global uncertainties, which are weighing, in particular, on the euro area manufacturing sector. in fact, some leading indicators such as manufacturing pmi and the ecb indicator on euro area new orders have declined recently, confirming weakening dynamics in the euro area manufacturing sector. at the same time, the euro area services and construction sectors are showing resilience and the labour market is continuing to improve. looking forward,