for the euro area of below 2 % ”. according to this definition, price stability “ is to be maintained over the medium term ”. in order for the eurosystem to achieve price stability, there is a need for a clear strategy, for adequate and timely monetary decisions and for an efficient operational framework, in order to ensure that these decisions are effectively transmitted to the financial sector and ultimately to the whole economy. let me first say a few words about the eurosystem ’ s strategy. it is based on two pillars, the first of these being a prominent role for money, and the second a broadly based assessment of the outlook for price developments. inflation is ultimately a monetary phenomenon ; thus, giving money a prominent role in its monetary policy analysis is quite natural for a central bank geared towards price stability. the important role assigned to money is reflected in the announcement of a reference value of 4½ % for the annual growth of the broad monetary aggregate m3. current m3 growth is analysed and interpreted in relation to this reference value. under normal conditions, substantial or prolonged deviations of monetary growth from the reference value would signal risks to price stability over the medium term. for the euro area, this relationship is empirically well founded. available econometric evidence suggests the existence of a stable relationship between m3, the euro area price level and a small number of other area - wide macroeconomic variables. moreover, there is solid evidence with regard to the leading indicator properties of m3 for future price developments. while there can be no doubt as to the relevance of monetary growth for inflation in the medium term, short - term changes in the stock of money may be influenced by factors unrelated to future spending and future inflation. thus, the eurosystem does not react mechanically to short - term deviations of monetary growth from the reference value. instead, monetary developments are analysed very carefully in order to extract their information content with regard to future inflation. if this analysis suggests that monetary developments are a threat to future price stability, monetary policy will respond in a manner appropriate to counter this risk. in parallel with the monitoring of monetary aggregates, the ecb also pays close attention to various other indicators which may signal inflationary risks or tensions : this is the second pillar of the monetary strategy. indeed, while inflation is a monetary phenomenon over the long term, it is useful in the short to medium - term to detect those inflationary tensions in the economy - reflected in various real and financial indices - which

first by decreasing rates of inflation in the course of this year and then by more fundamental upward tendencies later on. against this background, the governing council concluded that vigilance is required and pointed to several factors. first, developments in monetary and credit aggregates will need to be analysed continuously in order to assess upward risks to price stability. second, in view of the improving economic conditions, the potential spillover of large and protracted increases in import and producer prices into consumer prices will need to be assessed carefully. in this context, developments in the exchange rate and in oil prices will play a major role. it will be essential, both for maintaining price stability and for reducing the high level of unemployment, that wage settlements remain moderate and do not themselves contribute to inflation expectations, which would also endanger the sustainability of the current upswing. fiscal policies can make a substantive contribution to maintaining favourable economic conditions by using the current upswing as an excellent opportunity to proceed swiftly towards fulfilling the objectives of the stability and growth pact. economic conditions and perspectives in the euro area appear to be better at present than at any time in the past decade. growth is strong, employment is expected to increase further and the still very high level of unemployment should continue to fall. remaining vigilant to counter upside risks to price stability and pursuing structural reform is the foundation for a sustained period of strong economic growth and a lasting process of job creation. finally, i should like to draw your attention to two items not directly linked to today ’ s meeting of the governing council. first, i should like to inform you that on 30 march 2000 the governing council will meet for the first time outside frankfurt, namely in madrid. the meeting will be followed by a press conference. it is our intention that governing council meetings will be held in other euro area member states twice a year. in the second half of this year it is envisaged that the governing council will meet in paris. second, on 2 and 3 november 2000 the ecb will hold its first central banking conference. the topic of the conference will be “ why price stability? ” and it will take place in frankfurt. the ecb ’ s central banking conference, which will be organised biennially, will bring together invited participants from central banks, international and european institutions, academia and the press. as of today, regularly updated information, including a preliminary programme, will be provided on the ecb ’ s website. the final programme for the conference and all the papers