mr duisenberg reviews the first year of experience with the eurosystem ’ s monetary policy strategy speech by dr willem f duisenberg, president of the european central bank, at the joint congress of the federations, eurofinas and leaseurope, held in paris on 11 october 1999. * * * almost exactly one year ago, on 13 october 1998, the governing council of the european central bank ( ecb ) announced the main elements of its stability - oriented monetary policy strategy. as we reach the first anniversary of this announcement, it seems appropriate to reflect on our experiences over the last year and review the lessons that we have learnt. i am particularly grateful for your invitation to speak here today because of the opportunity it provides to present such a review. let me begin by clarifying some of our terminology, which still may not be familiar to everyone. “ eurosystem ” is the name we use to describe the european central bank and the eleven national central banks of those countries that introduced the euro on 1 january 1999. we call the geographical area defined by these eleven countries the “ euro area ”. the monetary policy implemented by the eurosystem is sometimes simply called “ the single monetary policy ”. the design of the eurosystem ’ s monetary policy strategy required an appreciation of the environment in which the eurosystem operates. this environment imposes certain constraints on the single monetary policy. it is useful to distinguish three categories of constraints : economic, institutional and practical. first, the eurosystem must acknowledge the capabilities and limitations of monetary policy implied both by general economic principles and by the structure of the euro area economy. second, the eurosystem must act in accordance with the mandate, tasks and powers assigned to it by the ec treaty. finally, the monetary policy strategy of the eurosystem has to reflect practical constraints, many of which arise because of the uncertainties created by the regime shift associated with the transition to monetary union. i should like to address each form of constraint in turn, starting with general economic issues. among central bankers and economists, overwhelming agreement exists that there is no long - run trade - off between real activity and inflation. attempting to use monetary policy to raise real economic activity above its sustainable level will, in the long run, simply lead to ever higher inflation, not faster economic growth. the best contribution monetary policy can make to sustainable growth and employment in the euro area is to maintain price stability in a credible and lasting manner, allowing the considerable

in substance, this statement is similar to what other central banks call “ minutes ”. as far as i am aware, no other central bank regularly communicates in such a prompt and open manner with the public immediately after its monetary policy meetings. giving these press conferences immediately after the governing council meetings also ensures that decisions and information are disseminated rapidly and even - handedly across the entire euro area and beyond. these press conferences are a tangible expression of the eurosystem ’ s commitment to be open, transparent and accountable in its conduct of monetary policy. they are supplemented by our appearances before the european parliament, by our monthly bulletin, annual report, working paper series and numerous speeches and presentations such as my remarks here today. in my view, the eurosystem ’ s commitment to openness should not be in doubt. turning to another point, critics of the eurosystem have argued that the single monetary policy has focused too closely on cyclical developments, in contrast to the public commitment made to a medium - term orientation. these criticisms are supported by the claim that the interest rate cut in april 1999 was made so as to support employment and growth prospects in the short term. let me be clear. the single monetary policy has had, and will continue to have, an appropriate medium - term orientation, in line with the strategy i described a moment ago. in this respect, monetary policy must always remain focused on the maintenance of price stability over the medium term. in april 1999, downward risks to price stability were appearing, which stemmed from the cyclical slowdown that occurred in the aftermath of the financial turmoil in emerging markets during mid - 1998. these downside risks made it necessary for the governing council to act. interest rates were cut. the focus on the primary objective of price stability driving this decision does not exclude, however, that – given risks to price stability are very often related to cyclical developments – in many cases the policy action required to maintain price stability may also help sustain real activity. the governing council ’ s decision to lower interest rates in april 1999 clearly helped to sustain confidence and thereby real activity in the short term. nevertheless, this decision was made to ensure the maintenance of price stability over the medium term. of course, central bankers should and do welcome the opportunity to help sustain the real economy and employment – even if the sustenance provided is only temporary. however, we must not raise expectations that the short - term impact of necessary monetary policy actions on real activity will always