and temporary, but we will of course continue to monitor very closely any available further evidence. turning to price developments, recent increases in oil prices have pushed headline inflation rates to levels in excess of 2 % over the last months. according to eurostat ’ s flash estimate, annual hicp inflation was 2. 1 % in august, compared with 2. 2 % in july, and inflation rates are expected to fluctuate around current levels over the next few months, with some further increases towards year - end. at the same time, when analysing underlying domestic inflationary trends, there continues to be no significant evidence of upside pressures building up in the euro area. in particular, wage increases have remained contained over recent quarters and this trend should prevail for the time being, given the current labour market situation. this picture is broadly in line with the new ecb staff projections. ecb staff project average annual hicp inflation to lie between 2. 1 % and 2. 3 % in 2005 and between 1. 4 % and 2. 4 % in 2006. these projections constitute significant upward revisions to the eurosystem staff inflation projections published in june, mainly reflecting the fact that oil prices have once again increased by more than was suggested earlier by forward rates. upside risks to this new baseline inflation scenario remain, relating to potential further rises in oil prices, administered prices and indirect taxes. more fundamentally, the main risks to the inflation outlook stem from potential second - round effects in wage and price - setting behaviour triggered by ongoing oil price rises. in this respect, it is essential that the social partners continue to meet their responsibilities. against this background, we will continue to monitor inflation expectations very closely. particular vigilance is required in order to ensure that longer - term inflation expectations remain well - anchored in the euro area. turning to the monetary analysis, money and credit have continued to grow robustly in the euro area over the last few months, mainly driven by the prevailing low level of interest rates. in particular, the growth of mortgage borrowing remains very strong. in this context, price dynamics in housing markets need to be monitored closely. the liquidity situation in the euro area remains ample by all plausible measures, indicating risks to price stability over medium to longer horizons. in conclusion, oil price developments have again led to upward revisions of inflation projections for the year ahead. at the same time, medium - term domestic inflationary pressures still remain contained, while the balance of risks to the baseline inflation

refinement of financial stability arrangements should remain a key priority for the eu. there are three broad areas where the eurosystem sees room for enhancing the present arrangements, namely financial stability assessment, the management of financial stress and deposit insurance. in this respect, let me recall that the provision of emergency liquidity assistance is a central banking function and that there is an agreement within the eurosystem on how this facility operates in the euro ara. thus, there are no specific issues relating to the provision of emergency liquidity assistance that need to be addressed in the context of the post fsap work. finally, let me stress again that the governing council of the ecb is very strongly attached to the full completion of the single market for banking services and to a level playing field making absolutely no difference between nationalities. i am now ready to answer your questions. 3 / 3