the stability - oriented monetary policy strategy of the eurosystem which underlie our single monetary policy. against this background, i shall briefly explain the recent monetary policy decisions adopted by the governing council of the ecb. finally, i shall summarise how we currently see the outlook for maintaining price stability in the euro area. i. the stability - oriented monetary policy strategy the treaty on european union, commonly referred to as the “ maastricht treaty ”, assigns the european system of central banks ( escb ) the primary objective of maintaining price stability in the euro area. in order to steer expectations of future price developments, the governing council has announced a quantitative definition of its primary objective. this clarifies how the treaty ’ s mandate is interpreted by the governing council and gives the public clear guidance concerning its assessment of the success of the single monetary policy. price stability is to be maintained over the medium term. according to the published definition, price stability has been defined as a year - on - year increase in the harmonised index of consumer prices ( hicp ) for the euro area of below 2 %. neither would deflation - that is, a persistent fall in the price level - be consistent with price stability. the annual rate of inflation in the most recent available data of around 1 %, measured on this harmonised basis, is consistent with the definition of price stability. the eurosystem has therefore enjoyed the good fortune to assume authority over monetary policy in the euro area in an environment of price stability, owing to the successful process of disinflation and convergence achieved within europe over the past decade. monetary policy needs a forward - looking, medium - term orientation. this takes into account the fact that monetary policy affects the price level only with variable, usually long and unpredictable time lags. it is not able to control all short - term movements in the price level. to maintain price stability, we have chosen a distinct monetary policy strategy, one that reflects the special circumstances that exist at present as well as those likely to prevail in the foreseeable future. the chosen strategy ensures as much continuity as possible with the former strategies of the ncbs. at the same time, it gives due consideration to the unique situation which will prevail in the early years of monetary union. – 3 – the stability - oriented monetary policy strategy rests on two “ pillars ”. the first pillar is a prominent role for money. this is deemed to be important on account of the

and productivity show below - trend growth rates, so potential growth is lower than trend. thus, potential gdp growth is now estimated to be around 2. 5 %, compared to the 2. 5 % to 3. 0 % we estimated in september 2016. with this, the current activity gap is somewhat narrower than previously estimated, even considering that the evolution of gdp has also been somewhat lower ( figure 9 ). for the purposes of monetary policy, the evolution of the activity gap is still consistent with an economy needing an important monetary impulse throughout the projection horizon. in addition, the board continues to estimate the neutral interest rate to be between 1 % and 1. 5 % in real terms. in our baseline scenario, we continue to forecast that gdp will gradually regain higher expansion rates, backed by favorable external conditions, the end of the mining investment adjustment, no big macroeconomic mismatches and a clearly expansionary monetary policy stance. this scenario also assumes that fiscal policy will remain on its consolidation path, expressed in the immediate future in the upcoming budget aligned with the administration ’ s commitments. all this in a context in which potential growth steadily approaches trend - consistent levels. accordingly, our projections show no major changes compared to our june estimates. for this year, we foresee that the economy will grow between 1. 25 % and 1. 75 % ( 1 % to 1. 75 % in june ). for 2018, we continue to expect growth to pick up, to a range between 2. 5 % and 3. 5 %, identical to our june forecast. on the expenditure side, our growth forecast for private consumption is slightly adjusted upward in 2017, considering the rebound of the real wage bill observed so far, the recovery of confidence indicators, the necessary replenishment of durable goods inventories and an appreciation of the real exchange rate. in investment, the downward adjustment of projections for 2017 stems primarily from construction, including the mining, infrastructure and housing components. this latter one because of the high stock of new homes for sale that still persists. thus, by 2017 a contraction of this component of gross fixed capital formation is expected, while the machinery and equipment component is slightly adjusted upwards, reflecting the actual data to date and also the steady growth in imports of capital goods excluding non - regular transportation. externally, exports are forecast to contract this year as a result of some supply - side shocks in manufacturing and mining downtime in the first half of the year, which has already been reflected in lower shipments from