Risks also stem from potential additional financial market tensions that could affect the real economy more adversely. Let me now turn to recent euro area price and cost developments. Recent inflation figures have been worrying. Over the last year, annual HICP inflation has risen steadily and markedly – from 1.7% August 2007 to 4.0% in July 2008.
4.6 The G-20 recognises that even within the framework of a co-ordinated response, local conditions will shape the nature of the response of individual countries. While many countries responded with substantial interest rate reductions, these responses were carried out in the context of very low inflation in many instances, and the need to provide liquidity to ailing banking sectors.