just a single regional economy, but rather many different local economies. let me talk a bit about how the different parts of our region have been doing. regional economic conditions since our last briefing in november, the economic recovery has been variable across the region – strong in some places but weaker in others. let me begin with the area that has struggled the most. puerto rico ’ s economy has, unfortunately, been in a deep economic slump that has lasted for nearly a decade. over the past few years, public sector job losses have continued to weigh against modest job gains in the island ’ s private sector. and ongoing difficulties in the island ’ s labor market continue, with labor force participation still alarmingly low, and unemployment stubbornly high at a rate well above the mainland ’ s. the good news is that we are finally beginning to see some firming in economic conditions on the island. at the other end of the spectrum, new york city has been experiencing a robust recovery. while the great recession was clearly the worst post - war downturn in u. s. history, new york city was not as badly affected as the rest of the country. as of april, almost five years since the end of the recession, the nation has recovered nearly all of the jobs that were lost. bis central bankers ’ speeches by contrast, new york city reached this milestone more than two years ago. and, as we ’ ve highlighted in previous press briefings, this rebound has occurred despite the lack of any significant recovery in employment on wall street. the recovery has generally progressed at a more moderate pace in the other parts of our region. consistent with historical patterns, upstate new york as a whole has been growing modestly, with buffalo and rochester doing a little bit better than their upstate peers. binghamton, on the other hand, has really been struggling with no signs yet of any meaningful recovery. meanwhile, northern new jersey ’ s economy had been growing fairly steadily until this past winter when activity softened, probably due at least in part to the unusually harsh weather. now that spring is finally upon us, we hope to see economic conditions improve more significantly. what kinds of jobs have been created during the recovery? let me turn to the topic of today ’ s press briefing : how the types of jobs in the region have changed over the last business cycle. firms often change the way they utilize workers and the mix of skills they employ during recessions and recoveries. the weakening demand during recessions forces firms to look

the world. turning to the outlook for prices, according to eurostat ’ s latest flash estimate, hicp inflation in september was 2. 1 %. this was unchanged from august. for the remainder of this year, hicp inflation should hover at around 2 %. exchange rate developments help to contain short - term upward pressure on prices, while higher unprocessed food prices related to the hot and dry weather conditions in some euro area countries could imply some limited upward risk over the next few months. for early 2004, there is still some uncertainty about the precise impact on hicp inflation of planned increases in indirect taxes and administered prices in a number of euro area countries. looking beyond the short term, however, we continue to expect inflation to fall below 2 % in 2004 and to remain in line with price stability thereafter. this expectation is based on the assumption of moderate wage developments in the context of a gradual economic recovery. in this respect, we note that inflation expectations in the euro area are anchored at levels below but close to 2 % over the medium to long term. turning to the monetary analysis, the strong monetary growth over the past two years has been fuelled by past portfolio shifts, precautionary saving and the low level of interest rates. the latter factor also provided a counterweight to the negative impact of weak economic growth on loan developments. in fact, there are signs of a pick - up in the growth rates of loans to the private sector. at the current juncture, the accumulation of excess liquidity is not a cause for concern given the subdued economic growth in the euro area. however, if it were to persist in conjunction with a significant strengthening of economic activity, it could lead to inflationary pressures in the medium term. summing up and cross - checking the information from the two pillars, our economic analysis continues to confirm the expectation that price pressures will remain subdued in the coming years, in the context of a gradual economic recovery and moderate import price and wage developments. in view of the economic situation, the strong monetary expansion should not be seen as adversely affecting this outlook for the time being. overall, therefore, the medium - term outlook for price stability remains favourable. as regards fiscal policy, we would like to reiterate our serious concerns. there is growing evidence that most countries will miss their budgetary targets for 2003 by a significant margin and, in a number of cases, budgetary plans for 2004 are not reassuring. while the deterioration of budgetary