Across the entire maturity spectrum, the levels of both nominal and real interest rates remained exceptionally low, lending substantial support to economic activity. At the same time, a number of upside risks to price stability emerged in the course of 2004.
These risks related mainly to developments in oil prices, potential second-round effects on wage and pricesetting behaviour and uncertainty about further increases in indirect taxes and administered prices. Moreover, strong monetary and credit growth and the accumulated stock of excess liquidity in the euro area increasingly gave cause for concern.