##ate the extent of monetary growth. precise statistical data for this category of instrument are still being collected by the ecb and will be published at the end of the year. if all these facets are taken into account, monetary growth is well below the quoted figure and cannot therefore be described as expansionary. from a medium - term perspective, there is no indication of price risks. in connection with the second pillar of the ecb ’ s strategy, the data point to decreasing pressure on prices. this would appear to be at odds with the current unsatisfactory price trend ; euro - area inflation was 3. 0 % in april. however, this was largely due to special factors, the effect of which is likely to subside in the coming months. basically, these factors are the higher prices of crude oil and, as a result, of fuel, together with the effect on prices produced by the crisis in the food sector. wage negotiators have been right to assume that the inflationary effects are temporary, as there have been no second - round effects so far. in stating that, i refer to the most recent wage settlement in the german banking sector. negotiators have agreed on a wage increase of slightly less than 3 %. now that economic risks can no longer be ignored, it is extremely important to negotiate moderate wage settlements. the rise in the cost of energy is currently driving overall prices up, while at the same time putting the brake on the economy. the outlook and forecasts in the euro area for this year have had to be adjusted. industrial output and capacity utilisation have already declined somewhat. surveys show that industrial sentiment, in particular, has become far more gloomy. viewed from this angle, this could also entail limited price risks for the period ahead. while the economic outlook is running counter to inflationary pressures, the euro exchange rate must be watched very closely for possible risks to price stability. let me again stress our utmost interest in a strong currency. the external value of the euro is an important indicator in the second pillar of the ecb ’ s monetary policy strategy. financial markets share our medium - term expectations for price developments. capital market rates are still at a low level – a reflection of the expectation that possible inflationary pressure will be under control over the longer term. interest rates, at least, are not an impediment to an economic upturn. after weighing up all the factors and taking account of the medium - term

due to two factors : · first, a change in the discount factor · and, second, revised earnings expectations stemming from changes in firms ’ financing costs and prospective sales. the adjustments in financial markets then translate into the broader economy via cost, income and wealth effects. the speed and the relative weight of the transmission channels identified depend on the structural conditions in the economy. habits in finance and investment among businesses and private households are important. as is overall flexibility of the economy. as the euro area as a whole is a relatively closed economy – about 17 % of gdp is generated by exports –, the exchange rate channel is of minor importance for monetary transmission. ii financial markets are dynamic and innovative ; structural change is everyday business. recently, the introduction of the single currency in europe has been seen to coincide with changes in investment and financing habits. as central bankers, we in the european system of central banks monitor these developments closely for their potential impact on monetary transmission. the relative importance of banking systems vis - a - vis financial markets as a source of corporate finance still varies in the euro area economies. so, consequently, does monetary transmission, although not to a degree that would hamper the single monetary policy. on the contrary, we see euro - area - wide disintermediation generating further convergence towards a truly european monetary transmission mechanism. companies are now tapping capital markets more intensively. in other words, firms have begun to rely less on banks for corporate finance. capital markets are gaining importance as a means of obtaining corporate finance, as opposed to bank credit. the amount outstanding of ( domestic currency denominated ) corporate bonds by euro - area residents rose one - fifth last year ; for short - term paper the figure is even two - fifths. banks are increasingly adapting to this trend. more and more they are providing corporate clients with access to capital markets. the banks themselves profit from securitisation. it helps them to make more efficient use of their capital and to generate the desired fee income. the role of banks in monetary transmission is therefore changing. faced with competition from firms directly tapping capital markets, banks are now setting their interest rates for lending more closely in line with prevailing market rates. shrinking interest rate margins are the result. any change in official interest rates will therefore translate faster into adjusted spending plans of the economic agents in the non - financial sector. thus, there is an acceleration of monetary policy transmission. however, there is also a factor that potentially works towards slower transmission. those