Thus, an environment of stable prices fosters the functioning of the price mechanism, favours allocation efficiency, anchors inflation expectations and reduces market uncertainty and risk premia. Maintaining price stability is therefore a necessary condition for sustainable growth and job creation and this is recognised very widely. It is in particular a strong belief that the Eurozone shares with the United Kingdom.
Similarly, the rise in stock prices, which reduces corporate contributions to pension funds is also augmenting reported profits. These upward adjustments in reported earnings, of course, are a consequence of rising stock prices and, hence, may not be of the same dimension in the future.