Currently, the euro area’s inflation rate is somewhat above our definition of price stability (2.4 % October). This is mainly due to temporary supply shocks, among them the increase of oil prices until the end of 2000 and livestock diseases. But the latest forecasts confirm that inflation will most likely fall below 2 % in the first half of 2002.
Still, at the present moment it is too early to conclude that the risks of inflation have been banished. But there is no doubt that these risks have been diminished due to the economic slowdown and weaker pressures from the demand side. Another stability safeguard are fiscal policies in the euro area that have become better coordinated in recent years.