european central bank : press conference – introductory statement introductory statement by mr willem f duisenberg, president of the european central bank and mr christian noyer, vice - president of the european central bank, at the press conference, held in frankfurt, 8 november 2001. * * * ladies and gentlemen, the vice - president and i are here to report on the outcome of today's meeting of the governing council of the ecb. the governing council conducted a comprehensive and in - depth examination of monetary and economic developments. against the background of the available evidence, it analysed the implications for the maintenance of price stability in the euro area, taking a forward - looking and medium - term perspective. as a result, the governing council decided to lower the key ecb interest rates by 50 basis points. at this new level, the key ecb interest rates continue to be appropriate to ensure a favourable outlook for price stability over the medium term. in assessing the information which has accumulated over the past few weeks we concluded that inflationary pressures have further diminished. this was particularly apparent from the information under the second pillar of the ecb's monetary policy strategy, while information relating to the first pillar was also judged consistent with today's decision. the governing council considered today's assessment to be in line with available forecasts and its view of economic developments in the period ahead. it is expecting these views to be broadly confirmed by further incoming information on the economic situation. the ecb will publish its own projections in the december issue of the monthly bulletin. let me elaborate somewhat on the assessment provided under the two pillars of the monetary policy strategy of the ecb. with regard to the first pillar, after having grown at a strong pace over the previous few months, m3 growth increased further in september. however, the recent evolution needs to be seen as a reflection of an increased liquidity preference of investors in an environment of a relatively flat yield curve until august, developments in global stock markets and a surge in financial market uncertainty following the terrorist attacks of 11 september. in addition, the growth of credit to the private sector has continued to decline over recent months. overall, despite the acceleration in m3 growth, current monetary developments do not signal risks to price stability in the medium term. we will continue to closely examine the underlying dynamics of monetary growth. regarding the second pillar, much clearer signals of a further reduction of inflationary pressures from the demand side have accumulated over recent weeks. euro area real gdp growth will

the ecb made its contribution to ensuring the sustainability of a process of non - inflationary economic growth in the euro area over the medium term. the success of this policy is evident in all measures of medium - term inflation expectations, notably in bond market developments which signal that, despite the recent increases in hicp inflation, markets expect price stability to prevail over the medium term. since the last increase of ecb interest rates in october 2000, risks to price stability in the euro area have become more balanced. however, they have not entirely disappeared. with regard to the first pillar of our strategy, m3 growth has, over recent months, gradually approached the reference value of 4½ %. in this respect, there is some evidence that the figures for m3 growth have been increasingly distorted upwards by measurement problems related to the non - resident holdings of marketable paper included in the definition of m3. the ecb is working on identifying these problems precisely and making the necessary corrections to the data. indications of lower inflationary pressures over the medium term have also emerged from the analysis under the second pillar of the ecb's monetary policy strategy. changes in the external environment have weakened the prospects for global economic growth, and uncertainty about the economic outlook, notably for the united states and japan, remains high. although the euro area is a large and relatively closed economy, some effects of the slowdown in the global economy will be felt. this can already be seen from the fact that business confidence has deteriorated and industrial production growth has moderated over recent months. nevertheless, growth in domestic demand is expected to remain robust. consumer confidence has remained high in recent months and, despite some decline, it is still around the cyclical peaks seen in 1998. more fundamentally, the euro area has not accumulated imbalances in the real economy or the financial sector that would require a pronounced adjustment. therefore, economic growth in the euro area is expected to remain solid. available forecasts ( including those of the european commission, the oecd and the imf ) suggest that actual growth will be in line with or above the trend potential growth in 2001 and 2002. while the somewhat slower pace of economic activity this year will reduce the risk of inflationary pressures, recent consumer price developments have been very much affected by energy and food prices. although a number of these effects are temporary in nature, it would be a mistake to rule out the possibility that their cumulative impact may produce more lasting price effects. the abatement of