jean - claude trichet : the ecb ’ s monetary policy strategy after the evaluation and clarification of may 2003 speech by mr jean - claude trichet, president of the european central bank, delivered at the center for financial studies ’ key event, frankfurt am main, 20 november 2003. * * * it is a pleasure to address such a distinguished audience. i am particularly happy to be able to devote one of my first public speeches as president of the ecb to a topic of fundamental importance for the ecb : its monetary policy strategy. as you know, this is a topic which the governing council of the ecb discussed at great length in the first half of 2003, when we conducted an evaluation of our experience with the strategy. this review resulted in the confirmation of our strategy on 8 may 2003. on the same day we also introduced some clarifications which have already proved very useful, particularly in terms of presenting and communicating to the public the more complex aspects of our monetary policy strategy. my aim here today is not so much to explain the meaning and details of the recent clarification, but rather to provide you with a description of the main features of the strategy. i will also address some important differences between our concept and alternative strategies, and i will explain why i consider the ecb ’ s strategy to be perfectly suited to the monetary policy of the euro area. i will then say a few words about the importance of sound public finances and structural reforms, particularly at such a critical point in time. 1. the ecb ’ s monetary policy strategy in a historic perspective in the initial stages of economic and monetary union ( emu ) in the early 1990s, many observers doubted that the single currency would ever see the light of day. then, when they realised that it would come, they speculated that only a few countries would be able to join. once it became clear that most eu countries were in a position to adopt the euro, some experts argued that the quality of the euro as a new currency would converge only towards a sort of an arithmetic average of the legacy currencies, rather than to the benchmark set by the stronger ones. it is now clear that such bouts of scepticism were much overdone. yet it was understandable that a substantial number of observers were initially cautious with regard to the euro ’ s chances of success. after all, monetary integration in europe was in itself an extraordinary innovation, which was surrounded by a large number of

jean - claude trichet : hearing before the economic and monetary affairs committee of the european parliament speech by mr jean - claude trichet, president of the european central bank, at a hearing before the economic and monetary affairs committee of the european parliament, brussels, 11 june 2007. * * * madame la presidente, mesdames et messieurs les membres de la commission economique et monetaire, je me rejouis d'apparaitre devant votre commission aujourd'hui et de poursuivre notre dialogue fructueux. comme toujours, je commencerai mon intervention par une evaluation de la situation economique et monetaire. anschließend mochte ich auf zwei themen naher eingehen : erstens, auf den eu - rahmen fur die regulierung, aufsicht und stabilitat der finanzmarkte sowie die role des eurosystems ; und zweitens auf die unternehmensfinanzierung in der eurozone, ein thema das im strukturbericht der ezb behandelt wird, den ich heute dem europaischen parlament presentieren mochte. economic and monetary issues since my previous appearance before the european parliament in march, incoming information has confirmed our view that economic growth in the euro area continues to expand at a pace significantly stronger than expected a year ago. regarding price developments, upside risks to price stability prevail over the medium to longer term, as identified by both our economic and monetary analyses. thus, in order to ensure that longer - term inflation expectations remain solidly anchored at levels consistent with price stability, on 6 june the governing council of the ecb decided to raise the key ecb interest rates by 25 basis points. after this decision, given the positive economic environment in the euro area, our monetary policy is still on the accommodative side, with overall financing conditions favourable, money and credit growth vigorous, and liquidity in the euro area ample. let me explain the governing council ’ s assessment underlying its decision. starting with the economic analysis, real gdp grew by 0. 6 % quarter - on - quarter in the first quarter of 2007 and thus again somewhat stronger than previously expected. looking ahead, conditions are in place for the euro area economy to continue to grow at solid