- priced, when inflation was quiescent and measures of slack were moderate. the second lesson is that price stability is the only anchor which can pin down the economy in turbulent times. it is not sufficient to guarantee financial stability, but it is certainly necessary to prevent financial instability. increasing the level of inflation that central banks should aim at would be a step in the wrong direction. our price stability mandate has not constrained us from responding forcefully and successfully to the biggest disinflationary shock experienced in generations. with inflation rates in the euro area currently projected to be slightly above 1 % in the short to medium term, deflation risks continue to be absent, and price stability has been maintained. most importantly, of course, price stability has not compromised macroeconomic stability. thank you.

mentioning the role of asset prices in the conduct of monetary policy. a long series of booms and busts over the past four decades have demonstrated that asset price developments can pose serious threats to macroeconomic and price stability, and that, therefore, central banks cannot simply neglect them. in this respect, it appears that a comprehensive monetary policy strategy, which also gives prominence to money and credit developments, might be better able to “ lean against the wind ” of financial exuberance. central banks should be equipped with a broad - based analytical framework for monitoring and analysing in detail such developments. at the ecb, this approach is underpinned by the monetary analysis, the second pillar of our monetary policy strategy. fiscal policy for many commentators, the financial crisis has underlined the need for a return of the state in managing macroeconomic developments. of course, together with central bank liquidity support, discretionary government intervention has been key in forestalling a repeat of a 1930s - style depression. however, we are observing a drift in public liabilities that will prove hard to correct with the usual stabilisers. in some countries, this drift actually has nothing to do with the financial crisis. it is rooted in the policy hyper - activism that was already in place before the crisis. and this despite the obvious dangers of an overreactive fiscal stance, which cannot be decided and implemented without long lags. here, fiscal rules, such as the stability and growth pact in the european union can help. if given enough authority, rules can induce symmetric behaviour. it remains to be seen how the discretionary fiscal measures adopted in response to the crisis can be wound down and reversed to support fiscal sustainability in the longer run. since the ecb has started to gradually phase out its extraordinary liquidity support measures, fiscal authorities should also start to withdraw stimulus to safeguard public solvency over the medium term. to support this, we have the right mechanisms in place in europe. governments will have to comply with and, as experience shows, even re - enforce the fiscal rules enshrined in the stability and growth pact. concluding remarks : some lessons from this quick overview, i draw two lessons for monetary policy. the first lesson to be learned is that central banks need to broaden – not restrict – their overview of the economy. monetary data are critical in warning against risks that are slow to appear in inflation forecasts. monetary analysis at the ecb consistently sent early signals that risk was broadly under