a limited effect on inflation and also on output and unemployment. this has been the case because of the high credibility of the ecb in safeguarding price stability. because of this high credibility, inflation expectations are now well - anchored. since the public has remained convinced that inflation will remain low in the long run, the energy price increases have not generated significant second - round effects on wages and prices. as a result, monetary policy has been able to maintain a more accommodative stance. this stance has been decisive in counteracting the negative effects of the oil price increases on the real economy. price stability is the goal of monetary policies around the globe today, the insight that price stability is the primary goal for monetary policy has also been translated into the mandates of central banks of advanced economies and also of a very large number of emerging economies. for instance, it is the case in the uk, it is the case in japan, it is the case in canada, in australia and new zealand. price stability is the goal of modern monetary policy around the world. this also holds true for the us fed. the mandate of the fed is sometimes contrasted with that of the ecb, because it comprises not only a goal of price stability but also the goals of maximum employment and moderate long - term interest rates. although the fed ’ s mandate does not establish a hierarchy among these goals, the fed has made clear on a number of occasions that it considers price stability as a necessary condition for and the best contribution of monetary policy to achieving the highest level of welfare and sustainable economic growth. the track record of the fed in controlling inflation over the past decades speaks for itself. the successive chairmen of the fed have made clear that the fed considers price stability not only as a goal but also as a means for the fed policy to achieve its other statutory goals. this is very much in line with our own framework and thinking. conclusion to sum up, it is an error to think that a choice needs to be made between price stability on the one hand, and sustainable economic growth and welfare on the other. price stability is both a precondition for and a means to enhance durable economic growth and welfare. that being said, we should all be aware that, if price stability is a necessary condition, it is not a sufficient condition per se for sustainable economic growth and job creation. as i have pointed out before, the growth potential of the euro area economy is ultimately determined by its structural features. that is

25 basis points, thus further adjusting its monetary policy stance after the interest rate increases in december 2005 and march 2006. by means of its timely further action, the governing council is helping to keep medium and long - term inflation expectations at levels which are in line with price stability, thereby making an ongoing contribution to sustainable economic growth and job creation in the euro area. notwithstanding the increase in key ecb interest rates on 8 june, our monetary policy in the euro area remains accommodative. it is essential to ensure that inflation expectations in the euro area remain firmly anchored at levels in line with price stability. the firm anchoring of inflation expectations has permitted inter alia to maintain since the creation of the euro a low level of risk premia across the whole maturity spectrum, and to prevent costly wage - price spirals in the context of considerably higher oil prices. it is essential that this important asset of the euro area economy is preserved. the contribution of monetary policy to economic welfare and stability having explained the more specific and current reasons for the ecb ’ s recent monetary policy moves, let me now put them in a broader perspective. as you know, the treaty states that, without prejudice to the primary objective of price stability, the eurosystem shall support the general economic policies in the community, aiming at a high level of employment and sustainable and non - inflationary growth. it is sometimes argued that the ecb ’ s overriding focus on price stability implies that we do not pay sufficient attention to this latter part of our mandate ; in other words, that in our policy we do not attach sufficient importance to growth, employment and the welfare of european citizens. i would like to explain to you that these assumptions are misguided : price stability, and economic growth and employment, rather than being substitutes, are complements in a relationship which makes price stability a necessary condition for sustainable growth and job creation. the contribution of monetary policy to economic welfare and stability price stability contributes to economic welfare and sustainable growth in many ways. an immediate way in which price stability contributes to welfare is by protecting the purchasing power of money, both for consumers and for savers. by protecting purchasing power, monetary policy also makes an important contribution to social cohesion, as the weakest groups of society are generally the least able to protect their savings against inflation. moreover, inflation has the effect of transferring wealth from savers to debtors, as savers face a loss in the value of their assets, whereas the real