Mr Duisenberg discusses the ongoing dialogue on monetary policy, the overall economic situation and other activities of the Eurosystem  Introductory statement by Dr Willem F Duisenberg, President of the European Central Bank, at the Hearing before the Committee on Economic and Monetary Affairs of the European Parliament, Brussels, on 20 March 2000. *  *  *  It is my pleasure to continue today our ongoing dialogue on monetary policy, the overall economic situation and other activities of the Eurosystem. Since our previous hearing in November, the European economic outlook has brightened further, while, at the same time, the balance of risks to price stability has shifted upwards owing, in particular, to external factors. Against this background, the decisions of the Governing Council of the ECB to raise interest rates in early February and last week, as well as the reasoning behind these steps, are at the centre of my presentation today. Moreover, I should like to touch upon the overall European economic environment. Finally, I shall briefly turn to some other activities of the Eurosystem which might be of particular interest to you. 1. Current economic developments and prospects  As you are aware, the Governing Council of the ECB decided on 3 February and 16 March 2000 to increase the three main ECB interest rates. These two decisions followed the interest rate decision taken on 4 November 1999.
Whereas the interest rates were increased by 50 basis points in November 1999, on the past two occasions the main refinancing rate and the rates on the marginal lending facility and on the deposit facility were each increased by 25 basis points, so that they now stand at 3.50%, 4.50% and 2.50% respectively. All three decisions were taken in the context of the monetary policy strategy of the Eurosystem to address upside risks to future price stability in the euro area. Both pillars of the monetary policy strategy indicated that the balance of risks to price stability in the medium term had been shifting upward in late 1999 and early 2000. Starting with monetary developments in the context of the first pillar, the three-month average of annual M3 growth exceeded the reference value throughout 1999 and in January 2000. Together with the continued strong expansion, at annual rates of around 10%, of credit granted to the private sector, this signalled that liquidity in the euro area is ample, contributing to upside risks to price stability in the medium term. In the context of the first pillar, let me briefly take up the issue of the reference value for monetary growth. As you know, the reference value is an expression of the prominent role of money in the first pillar of the monetary policy strategy of the Eurosystem. Following its meeting on 2 December 1999, the Governing Council confirmed the reference value for the growth of the broad monetary aggregate M3 at 4½% per annum.