to a pick - up in consumption. in addition, the effects of the changes in the exchange rate on trade are likely to be more than compensated for in the coming years by the expected acceleration in economic activity world - wide. on the latter aspects i should however not conceal that we also see some downside risks to the global recovery in economic activity. notably, the possible correction of macroeconomic imbalances in other major economies remains a factor of risk. in addition, we cannot exclude that the sars epidemic may have negative supply and demand effects, although it is difficult at this juncture to assess the possible implications. what does all this mean for the outlook for price stability? obviously, prospective developments in economic activity should contribute to restraining inflationary pressure in the euro area in the coming years. in this respect, after a period of rising wage growth, despite a context of subdued economic growth in 2001 and early 2002, we have seen signs of stabilisation of wage growth more recently. the effects of recent exchange rate developments will also make a significant contribution to reducing inflationary pressure, although some of the effects may be visible only with a certain time - lag. over the last couple of months, inflation has remained somewhat above 2 %. we expect that, after hovering around 2 % over the coming months, consumer price inflation should fall more significantly in 2004. partly due to the high volatility observed in financial markets in the past, but also due to the low level of interest rates, the euro area economy has continued to accumulate liquid assets significantly above the amount needed to sustain non - inflationary growth. the concerns about this situation are, however, limited, at least as long as economic activity remains subdued. the easing of geopolitical tensions and the recent stabilisation in financial markets should support an unwinding of these portfolio shifts over time. in addition, the moderate growth in loans to the private sector indicates that the growth in monetary aggregates does not reflect internal demand dynamics. thus, overall, not least due to the appreciation of the euro, inflationary pressures have declined significantly over recent months. this assessment will be reflected in our deliberations on monetary policy. as the organiser has asked me to also say a few words on the " policy mix " in the euro area, let me briefly conclude with some remarks on this topic. i think that the macroeconomic policy framework in the euro area is appropriate to ensure sustained and non - inflationary economic growth. fiscal policy

jean - claude trichet : hearing at the economic and monetary affairs committee of the european parliament speech by mr jean - claude trichet, president of the european central bank, brussels, 8 december 2008. * * * madame la presidente, mesdames et messieurs les membres de la commission economique et monetaire, je me rejouis de cette quatrieme rencontre avec votre commission au cours de cette annee. je commencerai mon intervention par une evaluation de la situation economique et monetaire, en expliquant les raisons sous - jacentes a nos recentes decisions de taux. je vous fournirai ensuite de plus amples informations sur nos operations de politique monetaire ainsi que notre dispositif de garanties. am schluss mochte ich auf das management der finanzkrise in europa eingehen und einige der reformvorschlage fur das internationale finanzsystem hervorheben, die ich fur besonders wichtig halte. danach beantworte ich wie immer gerne ihre fragen. economic and monetary developments since my previous hearing before your committee on 10 september, euro area annual inflation has continued to decline, falling to 2. 1 % in november. with lower commodity prices and weakening demand, annual inflation is expected to be in line with price stability over the policy - relevant horizon. risks to the outlook for price stability are more balanced than in the past. unexpected further declines in commodity prices could put downward pressure on inflation, while upside risks to price stability could materialise if the fall in commodity prices were to reverse or if domestic price pressures were to turn out stronger than assumed. turning to economic developments, since september, there has been an intensification and broadening of the financial turmoil, contributing in the third quarter to a contraction of 0. 2 % in real gdp growth compared to the previous quarter. global economic weakness and very sluggish domestic demand can be expected to persist in the last quarter of 2008 and in the next few quarters. subsequently, a recovery should gradually take place, supported by the fall in commodity prices and assuming that the external environment improves and financial tensions weaken. as a whole, average growth in 2009 could be between - 1 % and 0 % according to the eurosystem staff