over time and across regions. the risks to this growth outlook are assessed to be broadly balanced, but uncertainty remains high. with regard to price developments, average annual hicp inflation fell sharply to 0. 3 % in 2009, from 3. 3 % in 2008, largely due to substantially lower oil and other commodity prices as well as a result of the impact of the severe contraction in activity and rapidly deteriorating labour market conditions. in the course of 2009, annual hicp inflation turned negative for a few months, primarily as a consequence of the dynamics of commodity prices, particularly oil prices, and the associated base effects. excluding energy and food prices, hicp inflation has been on a gradual downward trend since mid - 2008, primarily reflecting a substantial moderation in labour costs and a sharp fall in profit margins over the course of 2009. in march 2010, euro area annual hicp inflation rose to 1. 4 %, from 0. 9 % in february, mainly driven by energy and unprocessed food price developments. nevertheless, in view of the projected slow economic recovery and high unemployment, inflation is expected to remain moderate in 2010 and over the rest of the policy - relevant horizon. risks to this inflation outlook remain broadly balanced. inflation expectations over the medium and long term continue to be firmly anchored in line with the governing council ’ s aim of keeping inflation rates below, but close to, 2 % over the medium term. the firm anchoring of inflation expectations to price stability reflects the high degree of credibility of the ecb ’ s monetary policy. the analysis of monetary and credit developments confirms the assessment of low inflationary pressures over the medium to longer term. in the course of 2009, the annual growth rates of the broad monetary aggregate m3 and of mfi loans to the private sector declined substantially and in parallel. towards the end of last year, these growth rates were in negative territory. the continuous decline in annual m3 growth in the course of 2009 largely reflected the strong downward impact of the exceptionally steep yield curve, while the subdued levels of activity and trade, and the uncertainty surrounding the business outlook, dampened firms ’ demand for bank financing. overall, the latest developments in money and credit markets support the assessment of low inflation risks over the medium to longer term. in february 2010, the annual growth rates of m3 and of loans to the private sector both stood at – 0. 4 %. the growth of m3 and loans to the private sector is likely to remain weak in the coming months as well.

to pursue policies, particularly in good times, that support the sustainability of public finances, and to ensure that economic surveillance results in effective policy actions that prevent budgetary risks and address structural problems to promote the competitiveness of the european economies. towards a more resilient financial system let me now conclude by addressing issues concerning financial regulation and supervision. as regards the regulatory reform agenda defined by the g20 leaders, significant and wideranging work has already been carried out or is under way, but we should not be complacent. it is crucial that the momentum for regulatory reform does not wane. there is still much to do : first, it is essential that the planned reforms effectively lead to a harmonised global regulatory framework. second, it is an urgent priority that the basel committee proposals on capital requirements and liquidity standards are properly calibrated and finalised by the end of 2010. third, we need to ensure that the regulatory framework effectively captures all systemically important financial institutions, and that moral hazard problems related to them are fully addressed. in the european union, the enhancements to the capital requirements directive should be swiftly adopted and an agreement on the directive on alternative investment fund managers be promptly reached. as regards the establishment of the new eu financial supervisory framework, it is important that the legislative process concerning the proposals made by the commission in september 2009, which are currently being discussed by your committee, is completed as expeditiously as possible and that all relevant parties reach an agreement on the legal texts so that the european systemic risk board ( esrb ) and the three new european supervisory authorities ( esas ) are operational by 1 january 2011. we should not risk losing momentum. the ecb has made good progress with its preparations to ensure that the esrb will efficiently and effectively perform its tasks from the moment of its inception. let me assure you that the support to be provided by the ecb and the escb to the esrb and the future links between them will not affect the ecb ’ s objectives and the performance of its tasks, which are clearly defined in the treaty. the primary objective of the ecb is to preserve price stability, and the conduct of the single monetary policy is geared towards achieving this goal. moreover, the ecb and the ncbs are fully independent in carrying out the tasks conferred upon them by the treaty. thus, there cannot be, and will not be, any potential conflict between the conduct of the ecb ’ s monetary policy that aims