5 % and 2. 5 % in 2007 and between 1. 3 % and 2. 5 % in 2008. most recent forecasts by international organisations give a broadly similar picture. compared with the september 2006 ecb staff projections, the ranges for 2006 and 2007 are somewhat lower, largely reflecting the assumption of lower energy prices. in this context, let me remind you of the conditional nature of these projections, which are based on a series of technical assumptions, including market expectations for short and long - term interest rates as well as for oil and non - energy commodity prices. in the governing council ’ s view, the outlook for price developments remains subject to upside risks, stemming in particular from a pass - through of previous oil price increases which is stronger than assumed in the baseline scenario, the possibility of renewed oil price increases and additional increases in administered prices and indirect taxes beyond those announced and decided thus far. more fundamentally, given the favourable momentum of real gdp growth observed over the past few quarters and the positive signs from labour markets, wage developments could be stronger than currently expected. therefore, it is crucial that the social partners continue to meet their responsibilities. wage agreements should take into account productivity developments in connection with the still high level of unemployment and positions in price competitiveness. it is also important that wage settlements move away from automatic, backward - looking indexation mechanisms. turning to the monetary analysis, annual m3 growth was unchanged at 8. 5 % in october, remaining close to the highest rates observed since the introduction of the euro, which points to inflationary risks at medium to longer horizons. increasing interest rates have exerted some influence over monetary developments in recent months, although as yet mainly by triggering shifts among the components of m3 rather than constraining the expansion of m3 itself. in particular, the annual growth rate of m1 has moderated somewhat, reflecting shifts from overnight deposits into other components of m3 which offer more market - related returns. more generally, the rate of monetary and credit expansion remains rapid, reflecting the low level of interest rates and the strengthening of economic activity in the euro area. in particular, loans to the private sector continue to grow at double - digit rates on an annual basis, their dynamism remaining broadly based across the household and corporate sectors. in the context of rising interest rates, the growth of household borrowing has shown signs of stabilisation in recent months, albeit at very high growth rates. by contrast, the growth of borrowing by non - financial corporations continues to trend upwards

for all countries it is paramount that pro - cyclical policies be avoided in the current economic upswing. more progress is also needed with fiscal structural reform as part of a comprehensive medium - term strategy to improve economic incentives and the soundness of social security systems. this would be a crucial contribution of fiscal policies to economic growth and fiscal sustainability as well as to confidence in the revised stability and growth pact. as regards structural reforms, the governing council welcomed the 2006 progress reports submitted by eu member states on their 2005 - 08 national reform programmes, in line with the renewed lisbon strategy. although it is encouraging that many concrete reform steps are being taken or are planned, there is still a considerable way to go to make the euro area a more dynamic economy, which is crucial to meeting the challenges of globalisation, population ageing and rapid technological change. reform measures should foster more integrated, flexible and competitive economies in the euro area, thus allowing more efficient adjustment processes and a stronger resilience to shocks. these are essential conditions for the substantial benefits of the single currency to be better exploited and for the economic performance to improve in both the euro area as a whole and in each member state. we are now at your disposal for questions.