mr duisenberg and mr noyer report on the outcome of the latest meeting of the ecb governing council introductory statement given by mr willem duisenberg, president of the european central bank and mr christian noyer, vice - president of the european central bank, to the press conference, held in frankfurt, on 7 october 1999. * * * ladies and gentlemen, the vice - president and i are here today to report on the outcome of today ’ s meetings of the governing council of the ecb, which was attended by the european commissioner, mr solbes mira. the outcome of today ’ s discussion was that the governing council has decided to leave the prevailing ecb interest rates unchanged. the interest rate on the main refinancing operations of the eurosystem will thus remain 2. 5 %. in addition, the interest rate on the marginal lending facility will continue to be 3. 5 % and that on the deposit facility has been kept at 1. 5 %. the governing council conducted an intensive discussion of the current monetary policy stance in which it was concluded that the balance of risks to price stability remains on an upward trend. with regard to monetary developments in the euro area, the three - month average of the 12 - month growth rates of m3 for the period june to august 1999 increased to 5. 6 %, from 5. 5 % in the three - month period ending in july 1999. while a good deal of caution is required when interpreting short - term monetary developments, it should be noted that the 12 - month growth rate of m3 has displayed an upward trend during 1999. the high growth of m3 seems to be related to the low level of opportunity costs of holding monetary assets, particularly the most liquid components. furthermore, the gradual improvement in the real economic situation may have fostered the expansion of m3. credit to the private sector also continued to expand at a fast rate in august 1999, namely 10. 7 %. since the start of stage three credit to the private sector has been expanding at rates of around 10 %. developments in credit growth in august tend to confirm that the demand for loans remains strong, supported by low bank lending rates, indicating that euro area residents do not face borrowing constraints. on balance, the governing council believes that monetary conditions, especially the sustained growth of m3 in excess of the reference value, signal a rather generous liquidity situation in the euro area. long - term nominal interest rates in the euro area continued to increase in september. while it is

likely that this increase is related to expectations of a recovery of activity in the euro area, expectations of increasing inflationary pressure may also play a role. the more favourable expectations for economic development in the euro area are partly connected with a further improved outlook for the world economy, as is also reflected in the recent upward revision of the forecast for world growth by the imf. the growth of the us economy continues to be strong, and in japan economic indicators are now more clearly pointing towards an improvement in economic activity. in addition, in some asian countries the recovery in growth appears to be taking place somewhat earlier than expected. notwithstanding individual downside risks in the countries i have just mentioned and a more general uncertainty regarding the recovery in latin america, the world economy seems to be set for higher growth. as regards economic activity in the euro area, some important data have been released since we last met. a first estimate by eurostat for real gdp growth in the second quarter of 1999 points to slightly lower quarter - on - quarter growth compared with the first quarter of this year. however, these data do not appear to impinge on the view that there is an upturn in growth in the course of this year. in fact, industrial production data for the period up to july confirm the gradual improvement of recent months, and various survey data suggest that there was a further strengthening of output growth in the industrial sector over the summer months. evidence for the consumer sector continues to point to broadly robust consumption growth. the outlook for a continuing improvement in overall activity therefore remains favourable. in line with our expectations, the annual rate of change in the harmonised index of consumer prices ( hicp ) saw a further rise in august 1999 to 1. 2 %, up from 1. 1 % a month earlier. this upward movement was mainly caused by the ongoing increase in oil prices. some counterweight came from a decline in unprocessed food prices and from a lower rate of increase in services prices. largely reflecting this development in services prices, the hicp rate excluding more volatile components – namely energy and seasonal food – declined to 0. 9 % in august, having risen to 1. 0 % in july. oil prices continued to increase further in september and, given the relatively short time of pass - through to consumer prices, expectations of further increases in the overall hicp rate in the coming months have become firmer. in conclusion, monetary and credit developments indicate that continuous close attention must be given to upward risks to price