2. 2 %. second, when looking forward from now until the early part of 2003, although recent developments in oil prices have lowered short - term price pressures, there are still some factors that could keep annual inflation rates above 2 % for several months to come. yet this short - term outlook is related both to base effects and to indirect taxes and administered prices, i. e. to temporary developments. third, when looking beyond the short term, we consider that both the overall economic environment and the euro exchange rate, which has strengthened since early this year, will contribute further towards reducing inflationary pressure. moreover, we expect the indirect effects of previous increases in oil prices and other factors to further unwind. although wage - related risks remain in place, they are judged less likely to materialise as long as the economic environment does not change substantially. the assessment which guided today's monetary policy decision was that, overall, the prospect has strengthened for inflation to fall below 2 % in the course of 2003 and to remain in line with price stability thereafter. our decision should also help to improve the outlook for the euro area economy by providing a counterweight to some of the existing downside risks to economic growth, thereby supporting confidence. the most likely scenario is that economic growth will gradually recover in the course of 2003 towards rates more in line with potential. falling inflation should support real disposable income and, together with a reduction in the gap between perceived and actual inflation rates, should underpin private consumption. moreover, we expect an improvement in world demand. this, and the low level of interest rates, should benefit investment. let me point out that, with today's decision, the key ecb interest rates have reached a very low level by historical standards. the governing council will continue to monitor closely all factors that may affect the prospects for inflation in the euro area. the outlook for the euro area economy will also very much depend on visible progress in other policy areas. regarding fiscal policies in the euro area, i would like to reiterate that budgetary discipline strengthens the conditions for sustainable growth of gdp and employment. therefore, sound fiscal positions, as enshrined in the treaty and further developed in the stability and growth pact, are in the interest of all the member states. given the disappointing fiscal developments in some countries and the challenges which have emerged to the eu fiscal framework, we welcome the moves to correct or prevent excessive deficits, i. e. the implementation of

european central bank : press conference - introductory statement introductory statement by mr willem f duisenberg, president of the european central bank and mr lucas papademos, vice - president of the european central bank, at the press conference held in frankfurt, 5 december 2002. * * * ladies and gentlemen, the vice - president and i will now report on the outcome of today's meeting of the governing council of the ecb. we continued our in - depth assessment of monetary, financial and economic developments and the discussions we had in early november on the appropriate stance of monetary policy, taking account of the new information. overall, since our last meeting, the arguments in favour of a cut in the key ecb interest rates have strengthened. the evidence that inflationary pressures are easing has increased, owing in particular to the sluggish economic expansion. furthermore, downside risks to economic growth have not vanished. as a result, the governing council has decided to lower the key ecb interest rates by 50 basis points. at today's meeting, we also reviewed the reference value for monetary growth, which has an important role under the first pillar of the ecb's monetary policy strategy. the governing council has decided to leave the current value unchanged at an annual growth rate of 4½ % for the broad aggregate m3. this decision was taken on the grounds that the evidence continues to support the assumptions which have formed the basis of the derivation of the reference value since 1999, namely those relating to trend potential output growth of 2 - 2½ % per annum and to a trend decline in m3 income velocity of ½ - 1 % per annum in the euro area. we will issue a separate press release this afternoon explaining in greater detail the background to this decision. when comparing current developments with the reference value, it is important to remember that the reference value is a medium - term concept. short - term movements of m3 do not necessarily have implications for future price developments. moreover, deviations of m3 from the reference value must be analysed in conjunction with other real and financial indicators in order to understand their implications for price stability. turning to the most recent data, in the period from august to october 2002 the three - month average of the annual growth rate of m3 was 7. 1 %, unchanged from the previous three - month average. m3 growth has been influenced considerably by portfolio re - allocations in an environment of general uncertainty and particularly by stress in financial markets. at the same time, it also reflects