It also provides credit for long maturities (with a 3-month maturity);  -  procedures guaranteeing a high level of security for all interbank transactions and large-value payments within the euro area and with other countries in the European Union, with in particular the TARGET system, which played a predominant role in the integration process of the euro money market. 2. The strategic framework also contributes to the efficiency of the single monetary policy  From the outset, there was a consensus among the designers of the Eurosystem that the Single monetary policy would require a clear strategic framework. This framework can be characterised by two main principles: a quantitative definition of price stability and a mediumterm orientation of monetary policy. The quantitative definition of price stability has been clarified after five years of experience The definition adopted by the ECB’s Governing Council in October 1998 was confirmed and clarified in May 2003 following an in-depth review of its strategic framework by the Eurosystem. In the wake of this assessment exercise, the Governing Council specified that price stability was defined as an annual increase in the HICP close to, but below, 2% over the medium term. Several remarks should complement this definition: -  by specifying that inflation should be close to 2%, the Governing Council intended first of all to confirm the symmetrical nature of its strategy by ruling out situations of deflation.
This is asking for strong vigilance so as to ensure that medium to longerterm expectations in the euro area remain solidly anchored at level consistent with price stability. 2. Macroeconomic stability and convergence  Price stability has not come at the expense of higher unemployment. Moreover, there are no visible signs of costs in terms of higher real macroeconomic volatility. Quite on the contrary, the volatility of real variables has declined relative to the averages observed during the 1980s and 1990s. Does one size fit all? It is often argued that a single monetary policy combined with inflation differentials leads to different real interest rates across countries, which in turn may destabilisize the currency union by creating divergence in output growth that exacerbate inflation differentials. This is by no way what we have observed: First, inflation dispersion among the euro area countries (measured as the unweighted standard deviation of annual HICP inflation rates) amounted to 0.7 percentage point in 2006 compared to around 6 percentage points in the 1990s. Since the inception of the euro, the average inflation dispersion across the euro area countries has been around 1 percentage  BIS Review 113/2007  5  point. This figure is very close to the dispersion observed across the 14 US metropolitan statistical areas. Concerning growth differentials, euro area averages naturally mask a variety of growth performances of individual countries within the single currency area, especially in a context where structural convergence has not been completed yet.