Economic and monetary developments Since my previous appearance before the European Parliament on 9 July when I presented the ECB’s Annual Report for 2007, annual inflation rates have remained at high levels well above those consistent with price stability. This is mainly the result of both the direct and indirect effects of past surges in international energy and food prices.
In addition, upside risks to price stability over the medium term have continued to prevail in a context where the underlying pace of monetary expansion continues to be strong. Looking ahead, inflation in the euro area is likely to remain high for quite some time, moderating only gradually during the course of 2009.