One factor in the strength of the single European currency has been the improved economic outlook for the area, in the face of fears of a slowdown in the United States. Monetary policy has remained conducive to growth. Real short-term interest rates are still below the average for the area over the last twenty years.
Long-term rates have risen, but by less than in comparable phases of past cycles. The gradualness and careful communication of monetary policy decisions have helped maintain stable conditions in the money and financial markets. Consumer price inflation in the euro area was 2.2 per cent in 2006, just over half the rate recorded in the early nineties.