the external environment, global economic growth has become more balanced across regions and, while moderating somewhat, remains robust, supported in part by lower oil prices. external conditions thus provide support for euro area exports. domestic demand in the euro area is also expected to maintain its relatively strong momentum. investment should remain dynamic, benefiting from an extended period of very favourable financing conditions, balance sheet restructuring, accumulated and ongoing strong corporate earnings, and gains in business efficiency. consumption should also strengthen further over time, in line with developments in real disposable income, as employment conditions continue to improve. this outlook is also reflected in the new ecb staff macroeconomic projections. the projections foresee average annual real gdp growth in a range between 2. 1 % and 2. 9 % in 2007 and between 1. 9 % and 2. 9 % in 2008. in comparison with the december eurosystem staff projections, the ranges projected for real gdp growth in 2007 and 2008 have been revised upwards, largely reflecting the strength of gdp growth in the second half of 2006 and the lower energy prices, which, if sustained, would have a positive impact on real disposable income. in the governing council ’ s view, the risks surrounding this favourable outlook for economic growth are broadly balanced over the shorter term. at longer horizons, risks lie mainly on the downside. the main risks relate to the possibility of a renewed increase in oil prices, fears of a rise in protectionist pressures and concerns about possible disorderly developments owing to global imbalances. as regards price developments, according to eurostat ’ s flash estimate, annual hicp inflation was 1. 8 % in february 2007, unchanged from january 2007. the fall in headline inflation rates since the summer of 2006 has been predominantly due to lower energy prices. looking ahead, last year ’ s volatility in energy prices will lead to significant base effects, affecting the profile of annual inflation rates this year. on the basis of the current level of oil prices and oil price futures, annual inflation rates are likely to fall during the spring and summer before rising again towards the end of the year and then most likely hovering again at around 2 %. the new ecb staff macroeconomic projections foresee annual hicp inflation averaging between 1. 5 % and 2. 1 % in 2007 and between 1. 4 % and 2. 6 % in 2008. compared with the december 2006 eurosystem staff projections, the upper bound of the range projected for inflation in

philipp m hildebrand : monetary policy situation and economic prospects summary of a speech by dr philipp m hildebrand, member of the governing board of the swiss national bank, at the centre for banking studies, lugano, 28 september 2004. the complete speech can be found in french on the swiss national bank ’ s website ( www. snb. ch ). * * * in formulating its medium - term monetary policy, the swiss national bank ( snb ) must take the uncertainty surrounding the development of the economic environment into consideration. the snb believes that the economy is well on the road to recovery, both in switzerland and abroad. for our country, it anticipates real gdp growth of close to 2 % in 2004. sustained growth is also expected for the coming years. consequently, the utilisation of the economy ’ s production capacity will steadily improve, while unemployment will gradually decline. the improved utilisation rate will be accompanied by a rise in inflationary pressure in the medium term. this scenario could be revised, however, if new information were to come to light. the snb will thus continue to monitor economic developments closely and will subsequently draw the necessary monetary policy conclusions.