Indeed, growth rates of money and credit which are persistently in excess of those needed to sustain non-inflationary economic growth may, under certain circumstances, provide early information on emerging, and potentially destabilising, asset price bubbles. In this respect, they act as a permanent admonition for vigilance in the face of unusual movements in asset prices. 6  BIS Review 66/2004  From what I have said, it has become clear that it is important to monitor asset prices and to try to avoid the emergence of unsustainable, pronounced movements in asset prices which may subsequently lead to sharp recessions. Obviously, there cannot be a mechanical link between asset prices and monetary policy instruments. Central banks, however, should take asset price movements into account, especially if large swings in asset prices imply long-term risks to financial and economic stability. Concluding remarks As you can see, there are a number of key concepts which I have emphasised in my speech today: “strong vigilance”; “careful monitoring and analysis”; “medium-term orientation”; “prompt reaction”. These are central elements of our approach to monetary policy-making, both at the current juncture and in connection with the specific topic of asset price developments that I discussed in the second part of my address. We live in a world of considerable uncertainty, not just in terms of economic shocks - which by definition are impossible to predict - but also in terms of our knowledge of how the economy functions, how economic agents form expectations and react to events and changing conditions.
And finally, in percentage terms, the oil price increase has not been as high as in previous oil price shocks. Despite this, however, oil price increases constitute a significant adverse shock to the euro area economy - through their direct impact on energy prices, their implications for global economic growth, and their adverse effect on the euro area’s terms of trade. If oil prices were to remain at close to USD 50 per barrel, or even increase further, they would dampen the strength of the recovery. With regard to inflation, oil price developments have had a powerful direct impact on the year-on-year change in the Harmonised Index of Consumer Prices (HICP), particularly in recent weeks. In October, annual inflation increased to 2.5%, according to a provisional estimate, from 2.1% in September. The oil price shock may feed through the economy and generate further indirect effects in the coming months. This is indicated by developments in producer prices, which showed a year-on-year increase of around 5% in September. On the whole, however, the information available so far does not suggest that stronger underlying inflationary pressures are building up in the euro area. Wages have grown at rates of around 2- 2½% over recent quarters. This trend should persist for some time in view of the high level of unemployment in the euro area.