This decision was taken on the grounds that the main elements which entered the determination of the reference value, namely the definition of price stability, the estimate of the trend growth of real GDP and the trend decline in the income velocity of M3, had basically remained unchanged. The Governing Council will continue to monitor monetary developments against the reference value on the basis of three-month moving averages of the annual growth rate of M3 as monthly developments might be too volatile. In addition, we also noted that the generous liquidity situation in 1999 will have to be kept in mind when assessing the information content of monetary developments in the future. Considering the second pillar of the monetary policy strategy, namely the broadly based assessment of other indicators containing information about the outlook for price stability, most indicators and forecasts have been pointing to increasing upward pressure on consumer price inflation over the medium term. The strong increase in oil prices in 1999 and early 2000 and the depreciation of the exchange rate of the euro in recent months have contributed to upward pressures on import and producer prices. In addition to the direct effects of these pressures on consumer price inflation, there is 1  BIS Review 25/2000  the risk in the context of the strong cyclical upswing that these developments could, via second-round effects, have lasting effects on consumer price inflation.
Aiming at positions of budget surplus and reducing debt to GDP ratios should free resources, which could be used by the private sector to finance new initiatives to create employment. I am confident that the first decade of the new millennium could, if all parties concerned take their responsibilities very seriously, mark the beginning of a prolonged period of price stability, growth and employment creation. Inflation rates are currently among the lowest levels observed after the war, and we are determined to maintain this very substantial achievement. Fiscal policies have already made good progress in correcting the serious mistakes of the 1980s and early 1990s and they are encouraged to continue on the path of fiscal consolidation. These favourable conditions for a period of growth are clearly better now than at any time over the last ten years and this should both foster and facilitate structural reforms. 2. Other activities of the Eurosystem  From among the other activities of the Eurosystem over the last few months, I should like only briefly to report on a few specific issues, which might be of particular interest to you. BIS Review 25/2000  2  At present, the ECB is preparing this year’s Convergence Report. As you will be aware, the Treaty requires the ECB and the Commission to present such a report at least every two years.