The projections will be published in the June and December issues of the ECB Monthly Bulletin, commencing in December 2000. Projections will be published for the growth rate of real GDP and its components and for HICP inflation. They will have a two-year horizon, so that the projections for both 2001 and 2002 will be published in December this year. In order to accurately reflect the degree of uncertainty attached to such exercises, the projections will be published in the form of ranges, based upon the average absolute errors made in previous national central bank and Eurosystem projections. The projections will be accompanied by a text describing their main features. I should emphasise that we use the word “projection” in order to signal that the published projections are the results of a scenario based on a set of underlying technical assumptions, including the assumption of unchanged monetary policy. This is the way forecasts are produced in many central banks in order to best inform monetary policy decision-makers. As the Eurosystem’s staff economic projections are the products of a technical exercise, which assumes, inter alia, that short-term interest rates and the exchange rate will not change over the forecast horizon, it should be clear that the staff projection will not, in general, be the best predictor of future outcomes, in particular for somewhat longer horizons. Rather, it represents a scenario which is likely to be falsified in practice, since monetary policy will always act to address any threats to price stability.

The Governing Council’s own guidepost for the future was published at the outset in the form of its quantitative definition of the ECB’s primary objective. This definition serves a different purpose, namely to anchor inflation expectations. Against this background, the published macroeconomic projections should not, under any circumstances, be seen as calling into question the commitment of the Governing Council to maintaining price stability over the medium term. The public, wage and price-setters, and all firms and households should continue to rely on the ECB’s quantitative definition of price stability as the “best prediction” of medium-term price developments, since the Governing Council is committed to changing monetary policy whenever this is necessary to maintain price stability. The publication of staff macroeconomic projections thus informs the public about an important input into the Governing Council’s decision process, which has already been used in the past. The publication of projections has to be considered in the context of the ECB’s monetary policy strategy. Publication thus changes neither the ECB’s monetary policy strategy nor the role of these projections within it. I am convinced that publication of these staff projections can help to improve the ECB’s presentation and explanation of monetary policy decisions. However, if this is to be the case, the public - and the European Parliament and your Committee - must recognise the limitations of forecasts and projections that I have just described, and the implications these limitations have for the role of staff projections in the ECB’s strategy. 3.