Annual HICP inflation rates of above 2% are likely to persist over the coming months, notwithstanding the recent oil price decline. Looking further ahead, however, the available information indicates that, barring further adverse shocks, HICP inflation will fall below 2% in the course of 2005. Moreover, the latest indicators do not suggest that underlying domestic inflationary pressures are building up in the euro area.
Wage increases remain contained, against the background of ongoing moderate economic growth and weak labour markets. In the context of what is a broadly favourable outlook for price developments over the medium term, upside risks to price stability need to be taken into account.