and to avoid that the current inflation rates become entrenched in private sector inflation expectations. this is not only the task of the central bank. all parties, in both the private and the public sector, can give a key contribution to maintaining price stability by abstaining from any practices that may fuel broad - based second - round effects. in this sense, it is particularly important that all parties concerned agree to abolish indexation schemes for nominal wages in those countries where they still exist. under the illusory pretence of preserving the purchasing power of workers, these schemes risk turning temporary price shocks into devastating inflationary wage - price spirals that ultimately undermine employment and competitiveness to the detriment of those whom the schemes are supposed to protect. let me also briefly recall the governing council ’ s current assessment of economic activity in the euro area. the latest data indicate that, after recording a 0. 2 % decline on a quarterly basis in the second quarter of 2008, the euro area economy is currently experiencing a period of weak activity, reflecting the dampening impact of both domestic and external factors. nevertheless, we expect the current episode of weakness to be followed by a period of gradual recovery. consistent with this scenario, the ecb staff projects average real gdp growth to between 1. 1 % and 1. 7 % in 2008, and between 0. 6 % and 1. 8 % next year. however, the uncertainty surrounding the outlook for growth in 2008 and 2009 is particularly high, with risks predominantly on the downside. these downside risks mainly stem from further unanticipated increases in energy and food prices, the continuing possibility that the financial turmoil may have a more severe impact on the real economy than currently anticipated, the potential for disorderly developments stemming from persisting global imbalances and increasing protectionist pressures. the monetary analysis has continued to confirm our view of prevailing upside risks to price stability at medium to longer horizons. although the growth of euro area broad monetary and credit aggregates has recently moderated, the continued underlying strength of monetary expansion signals the existence of upside risks to price stability over the medium term. on the basis of its economic and monetary analyses, the governing council decided yesterday to leave the ecb ’ s key policy rate ( the minimum bid rate of its main refinancing operations ) unchanged at 4. 25 %. it is our view that the current monetary policy stance will contribute to achieving our primary objective of maintaining price stability in the medium

to the policy rate. however, during the recent period of turbulence, open market operations have aimed also at ensuring the continued access of solvent banks to liquidity, notably by contributing to smoothening the impaired functioning of the money market. by doing so, the ecb has intended to contribute to re - establishing confidence among market participants and to see bordo, m. ( 2007 ), “ the crisis of 2007 : the same old story, only the players have changed ”, remarks prepared for the fed chicago and imf conference on globalisation and systemic risk. safeguarding financial stability and the appropriate functioning of the monetary policy transmission mechanism. from the very first day of the financial market turmoil, in an environment of increased liquidity risk and in response to banks ’ changed liquidity demand pattern, the ecb has achieved these objectives in two different ways. first, the eurosystem has adjusted the distribution of liquidity supplied over the course of the maintenance period, by frontloading the supply of liquidity at the beginning of the period and reducing it later, so that the total amount of liquidity over an entire maintenance period has remained unchanged. second, during the turmoil the eurosystem has applied different open market procedures to supply liquidity to the banking system. more specifically, the use of fine - tuning operations has been more frequent than in “ normal times ” because of the unpredictability of liquidity demand. in addition, the amount of refinancing provided via longer - term refinancing operations with 3 - month duration and, since april 2008, also with 6 - month maturity has increased significantly with a view to maintaining smooth conditions in the term money market. at the same time, the amount of refinancing provided via the one - week main refinancing operations has been reduced correspondingly, so that the total amount of outstanding refinancing has remained unchanged. given the global nature of the financial turmoil, central banks have strengthened their cooperation, first through enhanced information exchange and collective monitoring of market developments and later on by coordinated steps to provide liquidity. since december 2007, the ecb has, in cooperation with the us federal reserve and together with the swiss national bank, been conducting several term auction facilities – the so - called taf - operations – to provide usd liquidity to euro area banks. in practice, through these operations the ecb grants loans in usd to euro area banks, on behalf of the us fed, with a maturity of 28