european central bank : press conference - introductory statement introductory statement by mr jean - claude trichet, president of the european central bank, and mr lucas papademos, vice - president of the european central bank, frankfurt am main, 12 january 2006. * * * ladies and gentlemen, the vice - president and i would first like to express to all of you our best wishes for the new year and welcome you to this press conference. let me now report on the outcome of today ’ s meeting of the ecb ’ s governing council, which was also attended by commissioner almunia. on the basis of our regular economic and monetary analyses, we have decided to keep the key ecb interest rates unchanged following the increase of 25 basis points on 1 december 2005. the information which has become available since then supports the assessment that an adjustment of our very accommodative monetary policy stance was warranted. it remains essential to keep medium to long - term inflation expectations in the euro area solidly anchored at levels consistent with price stability. such anchoring of inflation expectations is a prerequisite for monetary policy to make an ongoing contribution towards supporting economic growth and job creation in the euro area. maintaining price stability over the medium term is our guiding principle, and we will consistently apply it when examining new information, making our judgements and taking decisions. with interest rates across the whole maturity spectrum remaining historically low in both nominal and real terms, and with our monetary policy stance remaining accommodative, we will continue to monitor very closely all developments with respect to risks to price stability over the medium term. allow me to explain our assessment in greater detail, turning first to the economic analysis. according to the information available, real gdp growth did indeed improve in the second half of 2005, as we expected. according to eurostat ’ s first estimate, real gdp grew at a quarter - on - quarter rate of 0. 6 % in the third quarter of 2005, compared with 0. 4 % in the second quarter. the breakdown of gdp data for the third quarter of 2005 confirmed a stronger contribution from domestic demand. moreover, recent economic indicators and survey data support the view that the expansion of economic activity broadly maintained its momentum in the fourth quarter of 2005 and will continue to do so in the first months of 2006, notwithstanding the impact of high oil prices. looking further ahead, the conditions remain in place for sustained growth of economic activity, in line with our staff projections and other available forecasts.

bank lending. at this point of the cycle, these considerations feature prominently in the discussions of the governing council members. there is no debate about our goal, which is to return inflation towards 2 % in the medium - term, in line with our mandate. * * * ladies and gentlemen, when we first thought about launching this forum in the spring of last year, we saw a clear value in setting aside time to withdraw from the pressure of our daily routines and the immediacy of decisions. the idea was to devote time to in - depth reflection on how to address the fundamental challenges facing central banks. in the event, the opportunity for in - depth reflection has proven as valuable as we expected – but our ability to detach from the pressures of the moment has been less than we thought. we are meeting against the backdrop of a complex economic situation : a slowly consolidating recovery, but one which has been accompanied by a gradual fall in inflation bis central bankers ’ speeches rates. cyclical developments are also interacting with structural developments, notably the structural deleveraging of the banking system. all this warrants discussion. to some extent, a disconnect between economic performance and inflation is to be expected in the very early stages of the economic upturn. as households and firms resume their spending plans in the aftermath of a long period of restraint, they tend initially to use existing resources more intensively. this raises measured productivity, but causes employment to return more slowly towards its potential, which reduces price pressures. in this context, the monetary policy response has to be carefully considered and precisely designed. we do not want to be too reactive to those parts of the disinflationary process that are expected to self - correct. we neither want to be too forbearing towards those factors that, if left unchecked, can lastingly undermine price stability. we are not resigned to allowing inflation to remain too low for too long. but to understand “ what is too low for too long ”, we need to answer two questions. first, why is inflation so low? this is essentially a question about the anatomy of inflation, meaning the nature of the shocks that are causing inflation to deviate from its intended level. second, once we have a decomposition of inflation, we can ask : how likely is it that it persists over the medium - term? this is a question related to the physiology of inflation, meaning how current low inflation influences economic behaviour and impacts the economy, notably through