broadly balanced over the medium term. monetary and, in particular, credit dynamics remain subdued. the annual rate of change of loans to the private sector and, notably, to firms weakened further in july. weak loan dynamics continue to reflect the current stage of the business cycle but also heightened credit risk and the ongoing adjustments in the balance sheets of borrowers and lenders. the significant improvement in the funding situation of banks since the summer of 2012 has not yet fed through into higher credit provision. review of recent monetary policy decisions against this background, the governing council has pledged to maintain monetary policy accommodative for as long as necessary. in order to re - affirm and clarify this conditional bis central bankers ’ speeches pledge, in a context of volatile money market interest rates, the ecb has introduced forward guidance in july, stating that it expects the key ecb interest rates to remain at present or lower levels for an extended period of time. this expectation, which has been reconfirmed in august and september, is based on a subdued outlook for inflation extending into the medium term, given the broad - based weakness in the economy and subdued monetary dynamics. we will maintain the degree of monetary accommodation warranted by the outlook for price stability and aim at promoting stable money market conditions. to ensure an adequate transmission of monetary policy to the financing conditions in the broader economy, it is essential that effective measures be taken to further reduce fragmentation of euro area credit markets and to strengthen the resilience of banks where needed. monetary policy contributes to these objectives, but it can only address impairments in transmission insofar as they are not related to more structural barriers. by giving unlimited access to central bank refinancing against adequate collateral, our nonstandard measures have been pivotal in relieving bank funding stress. the collateral framework has been adjusted as necessary to ensure continued adequate risk protection for the ecb ’ s balance sheet, while at the same time promoting transparency, for example in markets for structured finance products. ensuring that solvent banks remain liquid has contributed to avoiding an abrupt deleveraging which would have deeply damaged the economy. the outright monetary transactions ( omts ) announced a year ago have prevented risks of destructive scenarios with potentially severe challenges for price stability in the euro area. omts serve as a fully effective backstop, within the ecb ’ s mandate, and under formal conditionality so as to preserve the appropriate incentives for governments to ensure fiscal solvency and adopt those structural policies that can put

mario draghi : hearing at the committee on economic and monetary affairs of the european parliament introductory statement by mr mario draghi, president of the european central bank, for the hearing at the committee on economic and monetary affairs of the european parliament, brussels, 23 september 2013. * * * madam chair, honourable members of the committee on economic and monetary affairs, it is a pleasure for me to be back with your committee, shortly after the important vote of your assembly on the ssm regulation. this vote has been preceded by intense interaction on the interinstitutional agreement on accountability and transparency, and i would like to thank president schulz, your committee and the negotiating team for the commitment to a successful establishment of the ssm. our two institutions share a common interest in a swift and effective implementation of banking union. the draft inter - institutional agreement ensures high standards of transparency and accountability, while safeguarding the protection of confidential information. we will continue working with a similar constructive spirit in the months ahead and hope that this will allow a swift set - up of the supervisory board. today, i will first review recent economic and monetary developments in the euro area. i will then address the two topics that you have selected for our discussion : the impact of our nonstandard measures ; and the new tasks of the ecb in the reformed emu architecture. economic and monetary developments since our meeting in july we have received positive data for the euro area economy. following six quarters of negative output growth, euro area real gdp rose by 0. 3 %, quarter on quarter, in the second quarter of 2013. measures of confidence and surveys of production have given some support to the view that euro area economic activity should continue its slow recovery in the current quarter, despite weak production data for july. looking forward, economic activity should benefit from a gradual improvement in domestic demand, supported by the ecb ’ s accommodative monetary policy stance and strengthening external demand for euro area exports. however, unemployment in the euro area remains far too high, and the recovery will need to be firmly established. annual euro area inflation declined to 1. 3 % in august 2013, down from 1. 6 % in july. underlying price pressures are expected to remain subdued, reflecting the broad - based weakness in aggregate demand and the modest pace of the recovery. medium to long - term inflation expectations continue to be firmly anchored in line with price stability. the risks to the outlook for price developments are expected to be still