The ECB has announced a quantitative reference value for broad monetary growth as measured by M3, the first reference value for M3 growth being set at an annual rate of 4.5%. This reference value is consistent with the maintenance of price stability over the medium term, while allowing for sustainable output growth and assuming a trend decline in the velocity of circulation of M3. In setting the reference value for monetary growth, the Governing Council emphasised its medium-term orientation. Substantial or prolonged deviations of current monetary growth from the reference value will normally signal risks to price stability in the medium term. The ECB does not intend to react to deviations of monetary growth from the reference value in a mechanistic way. In the first instance, such deviations are analysed thoroughly to infer any signals which they may give about the prospects for price developments. If the deviation points to a threat to price stability, monetary policy has to react in a manner appropriate to counter this threat. Although monetary data contain information which is important for monetary policy decisionmaking, monetary developments alone clearly do not constitute a complete summary of all the economic information necessary for appropriate policy decisions to be taken. Thus the Governing Council emphasises that it is important, in parallel with the assessment of monetary growth, to look at a wide range of financial and other economic indicators, including economic forecasts.
The elimination of this main risk will also foster the development of uniform market standards so that government bonds in the euro area will become rather close substitutes, creating a large and liquid bond market. Obviously, this requires sound and sustainable budgetary policies that ensure that credit risk spreads remain small. Concluding remarks Following a remarkable period of disinflation in most member states, the Eurosystem has had the good fortune to commence its operations in an environment of price stability. The success enjoyed by the euro in its first five months can be certainly attributed to a number of factors. Above all, the successful efforts of member states made possible a smooth changeover to the euro. The independence of the ECB and the clear mandate to maintain price stability were 7  BIS Review 60/1999  crucial for ensuring a high degree of credibility of the Eurosystem’s monetary policy. As a final observation, I should simply like to mention that without the positive echo of financial markets and the permanent support of banks and financial institutions, a single currency in Europe could not have become a reality. BIS Review 60/1999  8