mario draghi : euro area economic outlook, the ecb ’ s monetary policy and current policy challenges statement by mr mario draghi, president of the european central bank, prepared for the twenty - eighth meeting of the international monetary and financial committee, washington dc, 12 october 2013. * * * i would like to focus on the euro area economic outlook, the ecb ’ s monetary policy and current policy challenges. economic activity in the euro area bottomed out in the first half of the year and is expected to strengthen gradually in the period ahead. recent economic indicators, which have been predominantly positive, support expectations of a modest and gradual recovery. output is expected to recover at a slow pace, driven by a gradual improvement in domestic demand supported by the ecb ’ s accommodative monetary policy stance and a gradual strengthening of external demand. furthermore, the improvements in financial markets seen since august 2012 appear to be gradually working their way through to the real economy, as should the progress made in fiscal consolidation. the risks surrounding the economic outlook for the euro area continue to be on the downside. developments in global money and financial market conditions and related uncertainties may have the potential to negatively affect the economic outlook. other downside risks include higher commodity prices in the context of renewed geopolitical tensions, weaker than expected global demand and slow or insufficient implementation of structural reforms in euro area countries. underlying price pressures in the euro area are expected to remain subdued, reflecting the broad - based weakness in aggregate demand and the modest pace of the recovery, as well as subdued monetary and credit dynamics. 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 broadly balanced over the medium term, with upside risks relating in particular to higher commodity prices as well as stronger than expected increases in administered prices and indirect taxes, and downside risks stemming from weaker than expected economic activity. the ecb ’ s monetary policy stance continues to be geared towards maintaining the degree of monetary accommodation warranted by the outlook for price stability. it thereby provides support to a gradual recovery in economic activity. looking ahead, our monetary policy stance will remain accommodative for as long as necessary. in line with the guidance provided in july, the governing council expects the key ecb interest rates to remain at present or lower levels for an extended period of time. this expectation is based on an overall subdued outlook for inflation extending into the

##minants of productivity shows that lower productivity growth in the euro area has been partly related to higher employment due to greater participation of lower - skilled labour. sustained wage moderation and some progress in labour market reforms aimed at increasing labour market participation appear to have partially shifted production towards a more intensive use of labour. there are also indications that the slower pace of productivity growth observed in the euro area since the mid - 1990s reflects an insufficient use of new productivity - enhancing technologies. while productivity growth has increased in sectors that produce information and communication technologies or provide related services, it has declined in many other areas of the economy. this points to structural rigidities in the euro area that prevent or hinder the fast and effective dissemination of new technologies and improved production processes across the economy. against this background, structural reforms that stimulate innovation, investment and productivity, and promote the use of new productivity - enhancing technologies are crucial. stimulating product market competition, facilitating restructuring and improving human capital through adequate educational systems and “ on - the - job ” training are likely to speed up productivity gains from the use of new technologies. we are now at your disposal for questions.