prices ( hicp ) of the euro area of less than 2 % compared with the previous year. the publication of this definition provides the public and the european parliament with a clear benchmark against which to measure the success of the single monetary policy, and thereby provides for the transparency and accountability of the eurosystem and its policy. the wording “ less than 2 % ” clearly defines the upper limit for the measured inflation rate which is compatible with price stability. i do not think i need emphasise that deflation – or a sustained fall in prices – would be incompatible with price stability. the latest available data for the annual rate of inflation according to the hicp for the euro area as a whole fall within the definition of price stability. this outcome is clearly the result, above all, of the successful monetary policy of the national central banks in the years before the start of monetary union. the ecb has only been responsible for monetary policy for a little more than one month. it will only be possible to judge the success of its current policy in one to two years ’ time. this reflects the fact that the transmission of monetary policy impulses is subject to relatively long and variable time lags. the governing council has therefore emphasised that price stability must be maintained in the medium term. this statement underlines not only the need for a forward - looking approach to monetary policy, but also takes into consideration the short - term volatility of prices in response to non - monetary shocks which are beyond the control of monetary policy. in order to achieve the goal of price stability, our strategy rests, in particular, on two “ pillars ”. before i explain this in more detail, i should like to emphasise that traditional and previously established macroeconomic relationships could change as a consequence of the introduction of the euro. this was one key reason why neither a monetary targeting nor a direct inflation targeting strategy could be applied. our strategy is also more than just a simple combination of these two approaches. rather, it is precisely tailored to the needs of the ecb. the first pillar of the monetary policy strategy is a prominent role for money. since inflation is ultimately a monetary phenomenon in the medium term, the money supply provides a natural “ nominal anchor ” for a monetary policy geared to safeguarding price stability. to emphasise this prominent role, the governing council has published a quantitative reference value for growth in the money supply. the first reference value decided upon by the governing council for growth in m3 was 4.

weeks the first longer - term open market operations were conducted, in the form of reverse transactions. these were carried out on 14 january 1999 in three parallel tender procedures with maturities of one, two and three months. the fixed rate tender procedure was used. by contrast with the regular main refinancing operations, the eurosystem does not use these longer - term operations to send signals to the market and therefore usually acts as a price - taker. the ecb thus gives advance indication of the planned allocation. the interest rates which arise from these monetary policy operations should therefore be seen as indicators of prevailing market conditions. regular assessment of the monetary, financial and economic situation to conclude, i should like briefly to report on the governing council ’ s current assessment of the monetary, financial and economic situation. on the basis of these assessments the governing council decided last tuesday to leave interest rates unchanged. taking into account the latest monetary data for december 1998, the three - month moving average of the 12 - month growth rate of the monetary aggregate m3 ( for the period from october to december 1998 ) remained more or less stable at 4. 7 %. this value is very close to the reference value set by the governing council. according to our analysis, the evolution of the money supply shows no risks to price stability. credit to the private sector also grew strongly in december last year. although at present we do not perceive any inflationary signals, further developments will be very carefully monitored. with regard to the broadly based assessment of the outlook for price developments and the risks to price stability in the euro area, monetary and financial developments can be seen to indicate a favourable assessment of the latest monetary policy decisions of the eurosystem. they indicate that market participants expect a continuation of the environment of price stability. long - term rates fell to new historical lows at the beginning of 1999 and there was an overall downward shift in the yield curve. therefore, financing conditions for investment are currently exceptionally favourable. at present the growth prospects for the euro area are, however, still marked by the uncertainties relating to the development of the world economy in 1999. these uncertainties have had a negative impact on indicators of the economic climate in the euro area. there are widespread expectations of an economic slowdown in the near future. this deterioration in the external economic environment can be linked, above all, to the financial crises in asia, russia and latin america. however, there is a mixed picture. while the growth rate for industrial production