, this should help stabilise euro area economic activity and lead to a gradual recovery in the second part of the year. at the same time, necessary balance sheet adjustments in the public and private sectors, and the associated tight credit conditions, will continue to weigh on economic activity. this economic outlook for the euro area remains subject to downside risks. the risks include the possibility of even weaker than expected domestic demand and slow or insufficient implementation of structural reforms in the euro area. these factors have the potential to dampen the improvement in confidence and thereby delay the recovery. according to eurostat ’ s flash estimate, euro area annual hicp inflation was 1. 7 % in march 2013, down from 1. 8 % in february. the ongoing decline in annual inflation rates mainly reflects the energy component of the price index. looking ahead, price developments over the medium term should remain contained in an environment of weak economic activity in the euro area. inflation expectations are firmly anchored and in line with price stability over the medium to long term. risks to the outlook for price developments continue to be broadly balanced over the medium term, with upside risks relating to stronger than expected increases in administered bis central bankers ’ speeches prices and indirect taxes, as well as higher oil prices, and downside risks stemming from weaker economic activity. turning to the monetary analysis, the underlying pace of monetary expansion continues to be subdued. the annual growth rate of m3 moderated to 3. 1 % in february, down from 3. 5 % in january. the annual growth rate of the narrow monetary aggregate, m1, increased to 7. 0 % in february, from 6. 6 % in january. at the same time, mfi deposits in a number of stressed countries strengthened further in february. the annual growth rate of loans ( adjusted for loan sales and securitisation ) to non - financial corporations and households remained broadly unchanged in february, at – 1. 4 % and 0. 4 % respectively. to a large extent, subdued loan dynamics reflect the current stage of the business cycle, heightened credit risk and the ongoing adjustment of financial and non - financial sector balance sheets. at the same time, available information on non - financial corporates ’ access to financing indicates tight credit conditions, particularly for small and medium - sized enterprises in several euro area countries. in order to ensure adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential that the fragmentation of euro area credit markets is reduced further and the resilience

christine lagarde : hearing of the committee on economic and monetary affairs of the european parliament introductory statement by ms christine lagarde, president of the european central bank, at the hearing of the committee on economic and monetary affairs of the european parliament ( by videoconference ), frankfurt am main, 21 june 2021. * * * dear chair, honourable members of the economic and monetary affairs committee, ladies and gentlemen, i am very happy to appear before this committee again today. while we are still meeting in a virtual setting, the health situation and economic prospects across europe have improved on the back of significant progress in vaccinations − with more than 100 million people in the european union now fully vaccinated. this makes me hopeful that we will meet again in person in brussels in the near future. in my remarks today i will first discuss the economic outlook for the euro area before turning to the ecb ’ s monetary policy, including the recent decisions taken by the governing council. finally, as per your explicit request, i will update you on our ongoing strategy review. the current macroeconomic and inflation outlook the outlook for the economy is indeed brightening as the pandemic situation improves, the vaccination campaigns progress, and confidence begins to rise. we expect economic activity to accelerate as of this quarter amid support from fiscal and monetary stimulus and a vigorous bounce - back of services activity in particular, which has been hardest hit by the pandemic and associated containment measures. manufacturing production remains robust, although supply shortages, mainly related to difficulties in procuring materials and equipment, could generate some headwinds for industrial activity in the near term. soft data also signal strong momentum in global activity, led by the rebound in advanced economies where vaccination rates have picked up. additional fiscal support, most notably the us fiscal stimulus package, is also supporting the recovery. these developments boost foreign demand and so have positive spill - over effects on the euro area. looking ahead, we expect economic activity to improve strongly in the second half of 2021, supported by a robust rebound in consumer spending and solid business investment. our latest staff projections currently foresee annual real gdp growth at 4. 6 per cent in 2021, 4. 7 per cent in 2022 and 2. 1 per cent in 2023. the risks surrounding the growth outlook have become broadly balanced. while on the downside, the spread of virus mutations continues to be a source of risk, on the upside, brighter prospects for global