not reflect the ongoing improvement in domestic fundamentals in the euro area economy. in nominal effective terms, the euro was around 4 % lower in mid - april than at the beginning of the year and approximately 14 % below its level in the first quarter of last year. until reversed, this development will put upward pressure on import prices and will continue to affect the risks for price stability in the euro area. as i have already noted on previous occasions, the rise in the harmonised index of consumer prices ( hicp ) which we have observed over recent months stems, to a large extent, from the combined effects of both oil price and exchange rate developments. the annual rate of change in the hicp rose to 2. 0 % in february 2000, from 1. 9 % in the previous month. the rate of inflation on producer prices also rose further in february 2000, mainly in connection with rising prices for intermediate goods. in the course of the past few weeks oil prices have declined. this has been in line with the assumption underlying currently available economic forecasts, namely that the oil price increases which we observed until march will partially unwind in the course of the year. at the same time, it is most likely that the complete upward impact on consumer prices via import and producer prices of the oil price and exchange rate developments in recent months has not yet materialised. against this background, the possibility cannot be ruled out that the figure for annual hicp inflation will slightly exceed 2 % in the spring of this year, before falling back to lower levels. what matters for monetary policy, however, are the trends underlying the outlook for price stability in the medium term. in this context, the governing council again stressed the need for the continuation of wage moderation in the euro area. as noted earlier, monetary and credit developments confirm that liquidity in the euro area is ample. developments in the exchange rate of the euro also remain a cause for concern with regard to future price stability. in the light of the favourable prospects for strong economic growth, the impact of these developments on inflationary pressures will need to be monitored closely. the eurosystem will remain vigilant in assessing upside risks to price stability and will take appropriate action if and when required. a forward - looking monetary policy which responds to risks to price stability before they materialise will avoid the need for a costly stabilisation of inflation at a later stage. such a forward - looking approach is clearly also the best contribution monetary policy can make to ensuring

this process very closely in order to ensure further cost and efficiency benefits for euro area corporations and citizens. conclusions i have outlined the factors that are the main determinants underlying the changing structure of the financial system in general and the banking sector in particular. overall, the various elements of the banking sector show that it is likely that a number of banking activities will be affected by this change. the foreseen structural changes require the need for adjustment to be taken seriously by all participants in the financial system. this adjustment appears to have intensified in recent years, as there has been an increase in merger activity, an establishment of alliances and an introduction of new products and services, often based on modern information technology. the process of structural change embodies an element of risk, but if these risks are identified early and analysed carefully, then they can be duly taken into account. what the ecb can do to help in this area is, first of all, to maintain stable monetary conditions. by creating an environment of price stability, we allow private sector agents to focus their attention on those questions which are of most relevance to their activities and to take advantage of the benefits of this stable environment, such as the possible extension of their planning time horizons. secondly, we can, to some extent, increase the awareness of the developments in the euro area ’ s financial structure and banking sector by providing euro area - wide information, and also analyses of these developments. all in all, the introduction of the euro and the single monetary policy has created a fundamentally new environment for banks in the euro area. a new environment that will entail certain risks, but that will also provide many opportunities for growth and enhanced efficiency in the banking industry. i am convinced that the latter will prevail.