Compared with the June projections, the ranges projected for real GDP growth have been adjusted slightly downwards. For 2005, this mainly reflects slight downward revisions of past data, while for 2006 this reflects the projected effects on disposable income of increases in oil prices. This outlook for economic activity is subject to a number of downward risks, relating mainly to higher oil prices, low consumer confidence and concerns about global imbalances. In particular, the potential further dampening impact of oil prices on the outlook for growth is being monitored very closely. Oil prices have continued to rise, increasing considerably since the beginning of the year, and developments in futures prices suggest that market participants expect the current tightness in oil markets to persist. Obviously, the situation has been further complicated by the tragic effects of Hurricane Katrina. All our thoughts are with the people of the city of New Orleans and all affected neighbouring areas and we are touched by the wave of global solidarity helping them to cope with  1/3  their immediate needs. At the same time, it remains difficult to assess the full extent of the damage and the period of time necessary for its repair. Normally, despite the significant wealth destruction resulting from such storms, the economic impact at the national level is limited to the short term and is increasingly offset by the positive impacts of rebuilding activity.
More fundamentally, the main risks to the inflation outlook stem from potential second-round effects in wage and price-setting behaviour triggered by ongoing oil price rises. In this respect, it is essential that the social partners continue to meet their responsibilities. Against this background, we will continue to monitor inflation expectations very closely. Particular vigilance is required in order to ensure that longer-term inflation expectations remain well-anchored in the euro area. Turning to the monetary analysis, money and credit have continued to grow robustly in the euro area over the last few months, mainly driven by the prevailing low level of interest rates. In particular, the growth of mortgage borrowing remains very strong. In this context, price dynamics in housing markets need to be monitored closely. The liquidity situation in the euro area remains ample by all plausible measures, indicating risks to price stability over medium to longer horizons. In conclusion, oil price developments have again led to upward revisions of inflation projections for the year ahead. At the same time, medium-term domestic inflationary pressures still remain contained, while the balance of risks to the baseline inflation scenario is tilted to the upside. Cross-checking the economic analysis with the monetary analysis confirms the need for particular vigilance in order to keep medium-term inflation expectations firmly anchored at levels consistent with price stability. By achieving this, monetary policy is making a significant contribution towards economic growth and job creation in the euro area.