##ening demand since we began the ecb's rate hiking cycle in july 2022. we raised interest rates consistently to avoid sudden shifts in expected inflation and to constrain the propagation of the inflation shock through price - wage dynamics. subsequently, headline inflation in the euro area is now at 2. 4 % and projected to reach our target next year. underlying inflation, neutralised from energy and food prices, is still slightly higher at 2. 7 %, but it is likewise projected to reach our target next year. thanks to this disinflationary process, inflation is converging to our 2 % target in a sustained way, and the time is thus ripe in june to ease the monetary policy stance and start cutting rates. this obviously assumes that the disinflationary trend will continue and there will be no further setbacks in the geopolitical situation and energy prices. going forward, in the ecb governing council we will continue to follow a datadependent and meeting - by - meeting approach when determining the pertinent policy stance. we will set our rates based on our analysis of the inflation outlook, the dynamics of underlying inflation and the strength of monetary transmission. and we are not pre - committing to any rate path. with declining inflation and delayed economic growth, we are continuously assessing what our policy stance in this context should be. without prejudging our primary objective of price stability, we also need to avoid a stance that unduly delays the closing of the negative output gap. economic activity in the euro area, 2007 - 2026 ( slide 5 ) before concluding, let me next say a few words about exceptional uncertainty and how to deal with it in monetary policy decision - making. first, when projections include unusual risks, we should not rely solely on a baseline projection and fan charts around it, but also consider alternative scenarios, as stated by ben bernanke in his recent review of the bank of england's economic forecasting. our experience in the eurosystem demonstrates that scenarios are useful in analysing and communicating risks around the baseline during the times of exceptional shocks. second, it is important to use a wide variety of economic indicators. for example, using a range of measures for underlying inflation and wages has been very useful in assessing how broad - based current inflation is and how durable the disinflationary process is ( ecb ( 2021 ) ). third, the effect of uncertainty on policymaking should not be limited only

a significant degree of enlightened self - interest will be required. i will begin with a quick review of the current situation, and compare it with where many of us thought, or hoped, we would be today. i will also show you where we might have been if timely and aggressive corrective action had not been taken. “ be thankful for what you have ” might be the appropriate epitaph for the great recession – it could have been worse. this is followed by a discussion of the economic game plan that was laid out by the g - 20 leaders at a meeting convened by president obama in late 2009. this g - 20 framework for strong, sustainable and balanced growth was designed to deliver what the name suggests. 4 u. s. gdp fell by roughly 4 per cent from peak - to trough, while real economic activity in europe and japan fell by 6 and 8 per cent, respectively. this assumes, of course, that the previous trend rate of growth was sustainable. remark by glenn stevens, governor of the reserve bank of australia, at a recent private meeting. for details of the g - 20 framework for strong, sustainable, and balanced growth. bis central bankers ’ speeches the third part of my presentation assesses what has transpired since 2009 – identifying those policy commitments that were fulfilled and those that were not, highlighting, in particular, the major failings. the fourth and final part of my presentation reviews where we need to go from here. that is the uplifting part of what i will say today. it ’ s not good, but it could have been worse the u. s. economy, as i noted a moment ago, has passed the peak that it reached just prior to the crisis, but it is well below where it would have been were it not for the collapse. unemployment remains near 8 per cent, compared with an earlier ( and perhaps unsustainable ) trough of 4. 4 per cent just before the crisis, and is well above consensus estimates of the structural or natural rate of unemployment. excess capacity is judged to be in the range of 3 to 4 per cent of potential output. chart 2 shows the state of the u. s. economy over the past five years ( the solid red line ), and where the bank of canada projects it will be going over the next two years ( the dashed red line ). the upper and lower bounds of the grey area represent the fastest and slowest recoveries of the u. s. economy following all