1 %. let me recall that we had always emphasised that “ substantial or prolonged deviations from the reference value under normal circumstances signal risks to price stability in the medium term ”. however, the data showed that m3 growth was only slightly above the reference value then and that there was not evidence as yet of a prolonged deviation. by contrast, there were several indications that m3 was temporarily distorted upwards in early - 1999 as a result of the changeover to stage three of economic and monetary union ( emu ), also against the background of historically low long - term rates. thus, at that point in time it was difficult to see whether m3 growth in early - 1999 would reveal upside risks to price stability. at the same time, the information from the second pillar of our strategy showed clear downside risks to future price developments in april. the situation was different in november. here it was clear that monetary growth had increased considerably over the course of 1999. the three - month average stood at 5. 9 % for the period from july to september 1999. even when we corrected the data in accordance with the somewhat specific movements of m3 in january and february, we could see that the annualised figure for m3 growth from march to september was 6. 1 %. all this took place in a significantly different economic environment compared with april. i think that this comparison between the two decisions to change ecb interest rates in april and november is very useful. it shows that we do not react mechanistically to individual indicators, but always interpret the movements and signals in all of the indicators evident in both pillars in conjunction with each other. as we can see, this is a more reasonable approach than relying on a simple indicator, given that we are living in a complex world. there is another line of argument which is that the monetary policy of the eurosystem focuses too closely on cyclical developments. this would be inconsistent with the public commitment to a medium - term orientation. this body of opinion often refers to the explanations delivered on the occasion of the interest rate cut in april 1999. these critics claim that this move was mainly intended to support employment and growth prospects in the short term. this is, in my view, an unfortunate miscomprehension of the facts and i shall try to be clear on this point. our monetary policy has had, and will continue to have, a forward - looking medium - term orientation, with the maintenance of price stability in the euro area as our focus. as

for the federal funds rate by 1 / 4 percentage point at both our march and june meetings, with the range now standing at 1 to 1 - 1 / 4 percent. and, in october, the committee began its balance sheet normalization program, which will gradually and predictably reduce our securities holdings. the committee set limits on the pace of balance sheet reduction ; those limits should guard against outsized moves in interest rates and other potential market strains. indeed, there has been little, if any, market effect associated with the balance sheet runoff to date. we do not foresee a need to alter the balance sheet program, but, as we said in june, we would be prepared to resume reinvestments if a material deterioration in the economic outlook were to warrant a sizable reduction in the federal funds rate. changes to the target range for the federal funds rate will continue to be the committee ’ s primary means of adjusting the stance of monetary policy. at our meeting earlier this month, we decided to maintain the existing target range for the federal funds rate. we continue to expect that gradual increases in the federal funds rate will be appropriate to sustain a healthy labor market and stabilize inflation around the fomc ’ s 2 percent objective. that expectation is based on the view that the current level of the federal funds rate remains somewhat below its neutral level — that is, the rate that is neither expansionary nor contractionary and keeps the economy operating on an even keel. the neutral rate currently appears to be quite low by historical standards, implying that the federal funds rate would not have to rise much further to get to a neutral policy stance. if the neutral level rises somewhat over time, as most fomc participants expect, additional gradual rate hikes would likely be appropriate over the next few years to sustain the economic expansion. of course, policy is not on a preset course ; the appropriate path for the federal funds rate will depend on the economic outlook as informed by incoming data. the committee has noted that it will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. more generally, in determining the timing and size of future interest rate adjustments, the committee will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. thank you. i would be pleased to answer your questions. 2 / 2 bis central bankers'speeches