I will then address a number of the policy issues examined in detail in the Annual Report which I consider to be of particular relevance. Economic and monetary developments In 2005 real GDP in the euro area expanded by 1.4%, somewhat below the 1.8% growth recorded in 2004, but the pace of economic activity tended to strengthen during the second half of the year.
Annual HICP inflation averaged 2.2% in 2005, marginally higher than the rate of 2.1% observed in each of the two preceding years, mainly as a result of substantial increases in energy and commodity prices. When reviewing economic and monetary developments and the ECB’s monetary policy decisions in 2005 and early 2006, it is useful to divide this time period into two parts.