production. third, by their very nature, economic frameworks can only provide a summary description of the economy and thus do not incorporate all relevant information. in particular, some information is not easily integrated into the framework used to produce the projections or may change after they are finalised. fourth, expert views are inevitably incorporated into projections and there can be good reasons at any moment of decision - making to deviate from the particular views or approaches on which they are based. the two - pillar approach chosen by the eurosystem - including a prominent role for money as the first pillar - is, to some extent, a reflection of these general limitations of forecasts and projections. i should stress that, because of these limitations, the second pillar of the ecb ’ s strategy also includes other forms of analysis in addition to macroeconomic projections. first, the ecb ’ s projections are cross - checked and compared with forecasts produced by others, such as international organisations and private sector entities. second, the forward - looking information and expectations embodied in financial prices and yields is thoroughly analysed and evaluated. this information can also be compared with the staff projections. finally, any information that is not contained in the staff projections for practical or timing reasons - such as the latest available outturns of certain data series must also be incorporated into the overall assessment. developments in individual indicators are also closely followed outside the framework of the forecasting exercise. it follows from this discussion that the governing council does not use its staff projections as the main tool for organising and communicating its assessment. rather, the governing council evaluates them alongside - and compares them with - many other pieces of information and forms of analysis organised in the two - pillar framework. in the context of the ecb ’ s strategy, macroeconomic forecasts and projections therefore play an important - albeit limited - role. two important points follow from the role of projections in the ecb ’ s strategy and the procedures used to produce projections within the eurosystem. first, the projections are produced by staff experts and do not embody the policy judgement of the governing council. they therefore represent one input into the policy - making process and not the outcome of the governing council ’ s deliberations. the governing council must exercise a policy judgement in evaluating the projections it receives, alongside all other analyses, when drawing implications for policy decisions. second, since policy decisions are based on a broad range of analyses conducted under the two pillars of the ecb ’ s monetary

willem f duisenberg : hearing before the committee on economic and monetary affairs of the european parliament introductory statement by dr willem f duisenberg, president of the european central bank, brussels, 23 november 2000. * * * as usual, i shall report on recent monetary policy decisions taken by the ecb and on the reasoning underlying these decisions. in addition, i should like to inform you about the decision taken by the governing council of the ecb last week to publish staff economic projections for the euro area. finally, i should like to say a few words about the progress report, which has been published by the ecb as part of its initiative to improve cross - border retail payment services in the euro area. 1. economic and monetary developments after the last hearing before this committee on 12 september, the governing council of the ecb decided to increase the ecb ’ s main interest rates by 25 basis points on 5 october 2000. the decision was taken to ensure that upward pressures on consumer prices would not translate into more permanent tendencies. it was based on evidence from both pillars of the monetary policy strategy of the ecb, notably continued money growth above the reference value and upward pressure on consumer prices owing to oil price and exchange rate effects in an environment of robust economic growth. let me comment in more detail on the governing council ’ s assessment of the current economic situation. in the period from july to september 2000, the three - month average of m3 growth stood at 5. 4 %, above the reference value of 4½ %. however, some indicators suggest that over recent months a moderation in monetary growth has been occurring. let me now turn, within the second pillar, to the prospects for economic growth in the euro area, as these represent a key factor affecting the outlook for price stability in the medium term. the latest estimate by eurostat for the second quarter of 2000 indicated a real increase in gdp of 0. 8 %. the pace of new job creation has remained high and the unemployment rate currently stands at 9. 0 %, a level not seen since mid - 1992. some monthly indicators suggest that some moderation in real gdp growth might have occurred in the second half of this year, mainly as a result of the negative impact of the recent increases in oil prices on domestic income. however, by contrast with previous periods of strong oil price rises, the euro area economy is now less dependent on oil. this should help to prevent any sustained negative effect on confidence. there are therefore good