the efficient and smooth functioning of economic adjustments within the euro area requires the completion of the single market and thus greater domestic and cross - border competition. * * * * let me conclude by briefly addressing the committee ’ s concern over whether we are experiencing a new and lasting upward shift in inflation. the central bank is precisely there to prevent such a lasting shift and to deliver price stability over the medium term. on the basis of the assessment of the governing council the current monetary policy stance will contribute to achieving this objective. the governing council remains resolute in its determination to keep inflation expectations solidly anchored in line with price stability. at the same time, upside risks to price stability over the medium term, in particular those stemming from second - round effects in price and wage setting, prevail. in this context, in order to avoid that the current high inflation rates become entrenched in expectations, it is of the essence that all relevant parties – price setters and social partners – meet their responsibilities. as emphasised, it is also important that indexation schemes are abolished. this would strengthen the resilience of growth and employment creation of the euro area economy with regard to the current adverse developments we have to confront.

jean claude - trichet : hearing before the economic and monetary affairs committee of the european parliament speech by mr jean - claude trichet, president of the european central bank, before the economic and monetary affairs committee of the european parliament, brussels, 10 september 2008. * * * madame la presidente, mesdames et messieurs les membres de la commission economique et monetaire, je me rejouis de ce troisieme echange de vues avec votre commission au cours de cette annee. je commencerai mon intervention par une evaluation de la situation economique et monetaire, en expliquant les raisons sous - jacentes a nos recentes decisions de taux. je me pencherai ensuite sur les developpements sur les marches financiers en vous donnant de plus amples informations sur les operations de politique monetaire que la bce a menees face aux tensions demeurant sur le marche monetaire. des weiteren freue ich mich das von ihnen aufgeworfene thema der interdependenz zwischen den vereinigten staaten von amerika und der eurozone zu erortern. zudem mochte ich naher auf die entwicklung der wettbewerbsfahigkeit innerhalb der eurozone eingehen. abschließend erfolgt ein inflationsausblick auch im hinblick auf ihre frage, ob eine phase hoherer preissteigerungsraten vor uns liegen konnte. economic and monetary developments since my previous appearance before the european parliament on 9 july when i presented the ecb ’ s annual report for 2007, annual inflation rates have remained at high levels well above those consistent with price stability. this is mainly the result of both the direct and indirect effects of past surges in international energy and food prices. in addition, upside risks to price stability over the medium term have continued to prevail in a context where the underlying pace of monetary expansion continues to be strong. looking ahead, inflation in the euro area is likely to remain high for quite some time, moderating only gradually during the course of 2009. according to the latest ecb staff projections the average annual inflation rate is foresee