Import prices  Services prices  Annual percentage change  Annual percentage change  15  15  10  10  5  5  0  0  5  Australia USA United Kingdom Norway Canada Sweden  4  3  -5  Australia USA United Kingdom Norway Canada Sweden  -10 -15 10  11  12  13  5  4  3  2  2  1  1  -5 -10 -15  14  0  0 10  11  12  13  14  Note. In Figure 2b, the data for Australia is quarterly, while the data for other countries is monthly. For Sweden, Norway, the euro area and the United Kingdom, the data refers to services prices in the HICP and for others in the CPI. Sources: National sources and Statistics Sweden  9  The KIX index for policy rates only includes the euro area, Norway, the United Kingdom and the United States. Its composition has been governed by the relevance of the respective country’s policy rate for pricing on the foreign exchange and financial markets. For a more detailed explanation, see Sveriges Riksbank (2012). BIS central bankers’ speeches  5  Slower domestic demand and low inflation expectations also contribute The impact of monetary policy via the exchange rate can be primarily observed in prices of internationally-traded goods. However, a monetary policy that leans against the wind also has effects on inflation in that it dampens domestic demand.
Looking ahead, we expect the euro area economy to grow at a moderate pace, in an environment of continued tensions in some financial market segments and of unusually high uncertainty. A cross-check of the outcome of our economic analysis with that of the monetary analysis confirms that inflationary pressures over the medium term remain contained, as suggested by weak money and credit growth. Overall, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2% over the medium term. The firm anchoring of inflation expectations remains of the essence. Accordingly, the Governing Council will continue to monitor all developments over the period ahead very closely. As regards fiscal policies, the Governing Council welcomes the recent decision by euro area countries to formally establish a European Financial Stability Facility. This needs to be accompanied by decisive action at the level of governments. It is essential that all countries stick to their commitments to correct high budget deficits and government debt and reduce fiscal vulnerability. To this end, the concrete adjustment measures needed to achieve the budgetary targets should be fully specified. All countries must ensure that confidence in the sustainability of public finances is guaranteed.