, signal a continuation of the very gradual recovery in the second quarter of 2014. looking ahead, domestic demand should be supported by a number of factors, including the further accommodation in the monetary policy stance and the ongoing improvements in financing conditions. in addition, the progress made in fiscal consolidation and structural reforms, as well as gains in real disposable income, should make a positive contribution to economic growth. furthermore, demand for exports should benefit from the ongoing global recovery. however, although labour markets have shown some further signs of improvement, unemployment remains high in the euro area and, overall, unutilised capacity continues to be sizeable. moreover, the annual rate of change of mfi loans to the private sector remained negative in may and the necessary balance sheet adjustments in the public and private sectors are likely to continue to dampen the pace of the economic recovery. the risks surrounding the economic outlook for the euro area remain on the downside. in particular, geopolitical risks, as well as developments in emerging market economies and global financial markets, may have the potential to affect economic conditions negatively, including through effects on energy prices and global demand for euro area products. a further downside risk relates to insufficient structural reforms in euro area countries, as well as weaker than expected domestic demand. bis central bankers ’ speeches according to eurostat ’ s flash estimate, euro area annual hicp inflation was 0. 5 % in june 2014, unchanged from may. among the main components, services price inflation increased from 1. 1 % in may to 1. 3 % in june, while food price inflation fell from 0. 1 % to – 0. 2 %. on the basis of current information, annual hicp inflation is expected to remain at low levels over the coming months, before increasing gradually during 2015 and 2016. meanwhile, inflation expectations for the euro area over the medium to long term continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2 %. the governing council sees both upside and downside risks to the outlook for price developments as limited and broadly balanced over the medium term. in this context, we will closely monitor the possible repercussions of geopolitical risks and exchange rate developments. turning to the monetary analysis, data for may 2014 continue to point to subdued underlying growth in broad money ( m3 ). annual growth in m3 was 1. 0 % in may, compared with 0. 7 % in april. the growth of the

narrow monetary aggregate m1 moderated to 5. 0 % in may, after 5. 2 % in april. the increase in the mfi net external asset position, reflecting in part the continued interest of international investors in euro area assets, has recently been an important factor supporting annual m3 growth. the annual rate of change of loans to non - financial corporations ( adjusted for loan sales and securitisation ) was – 2. 5 % in may 2014, compared with – 2. 8 % in april. lending to non - financial corporations continues to be weak, reflecting the lagged relationship with the business cycle, credit risk, credit supply factors and the ongoing adjustment of financial and non - financial sector balance sheets. the annual growth rate of loans to households ( adjusted for loan sales and securitisation ) was 0. 5 % in may 2014, broadly unchanged since the beginning of 2013. against the background of weak credit growth, the ongoing comprehensive assessment of banks ’ balance sheets is of key importance. banks should take full advantage of this exercise to improve their capital and solvency position, thereby supporting the scope for credit expansion during the next stages of the recovery. to sum up, the economic analysis indicates that the current low level of inflation should be followed by a gradual upward movement in hicp inflation rates towards levels closer to 2 %. a cross - check with the signals from the monetary analysis confirms this picture. as regards fiscal policies, substantial fiscal consolidation in recent years has contributed to reducing budgetary imbalances. important structural reforms have increased competitiveness and the adjustment capacity of countries ’ labour and product markets. however, significant challenges remain. to strengthen the foundations for sustainable growth and sound public finances, euro area countries should not unravel the progress made with fiscal consolidation, in line with the stability and growth pact, and should proceed with structural reforms in the coming years. fiscal consolidation should be designed in a growth - friendly manner, and structural reforms should focus on fostering private investment and job creation. a full and consistent implementation of the euro area ’ s existing fiscal and macroeconomic surveillance framework is key to bringing down high public debt ratios, to raising potential growth and to increasing the euro area ’ s resilience to shocks. finally, i wish to inform you that the governing council today announces that the frequency of our monetary policy meetings will change to a six - week cycle, from january 2015. the reserve maintenance periods will be extended to six weeks to match the new schedule. moreover, we