greater detail, starting with the economic analysis. incoming data and survey results suggest that economic activity improved significantly in may and june from its trough in april, alongside the ongoing containment of the virus and the associated easing of the lockdown measures. at the same time, economic indicators remain well below the levels recorded before the pandemic, and the recovery is in its early stages and remains uneven across sectors and jurisdictions. after decreasing by 3. 6 %, quarter on quarter, in the first quarter of 2020, euro area real gdp is expected to have contracted even further overall in the second quarter, broadly in line with the june 2020 eurosystem staff macroeconomic projections. signs of a recovery in consumption have emerged, while there has also been a significant rebound in industrial output. at the same time, subdued labour market conditions and precautionary household saving are weighing on consumer spending. weak business prospects and high uncertainty are dampening investment, while the weakness in the global economy is hampering foreign demand for euro area goods and services. euro area activity is expected to rebound in the third quarter as the containment measures are eased further, supported by favourable financing conditions, an expansionary fiscal stance and a resumption in global activity, although uncertainty about the overall speed and scale of the rebound remains high. in general, the extent of the contraction and the recovery will depend crucially on the duration and effectiveness of the containment measures, the success of policies to mitigate the adverse impact on incomes and employment, and the extent to which supply capacity and domestic demand are permanently affected. overall, the governing council assesses the balance of risks to the euro area growth outlook to remain on the downside. according to eurostat ’ s flash estimate, euro area annual hicp inflation increased to 0. 3 % in june, from 0. 1 % in may, mainly reflecting less negative energy price inflation. on the basis of current and futures prices for oil and taking into account the temporary reduction in the german vat rate, headline inflation is likely to decline again in the coming months before picking up in early 2021. over the medium term, weaker demand will put downward pressure on inflation, which will be only partially offset by upward pressures related to supply constraints. marketbased indicators of longer - term inflation expectations have continued to increase from the historical lows reached in mid - march, but overall remain at subdued levels. while survey - based indicators of inflation expectations have declined since the start of the pandemic, longer

end of june 2021 and, in any case, until the governing council judges that the coronavirus crisis phase is over. we will reinvest the principal payments from maturing securities purchased under the pepp until at least the end of 2022. in any case, the future roll - off of the pepp portfolio will be managed to avoid interference with the appropriate monetary policy stance. net purchases under our asset purchase programme ( app ) will continue at a monthly pace of €20 billion, together with the purchases under the additional €120 billion temporary envelope until the end of the year. we continue to expect monthly net asset purchases under the app to run for as long as necessary to reinforce the accommodative impact of our policy rates, and to end shortly before we start raising the key ecb interest rates. we intend to continue reinvesting, in full, the principal payments from maturing securities purchased under the app for an extended period of time past the date when we start raising the key ecb interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. we will also continue to provide ample liquidity through our refinancing operations. in particular, the latest operation in the third series of targeted longer - term refinancing operations ( tltro iii ) 1 / 3 bis central bankers'speeches has registered a very high take - up of funds, supporting bank lending to firms and households. the monetary policy measures that we have taken since early march are providing crucial support to underpin the recovery of the euro area economy and to safeguard medium - term price stability. in particular, they support liquidity and funding conditions in the economy, help to sustain the flow of credit to households and firms, and contribute to maintaining favourable financing conditions for all sectors and jurisdictions. at the same time, in the current environment of elevated uncertainty and significant economic slack, the governing council remains fully committed to doing everything necessary within its mandate to support all citizens of the euro area through this extremely challenging time. this applies first and foremost to our role in ensuring that our monetary policy is transmitted to all parts of the economy and to all jurisdictions in the pursuit of our price stability mandate. the governing council, therefore, continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry. let me now explain our assessment in