The average annual increase in the HICP since the launch of the euro has been very close to 2%, despite the sizeable adverse price shocks during this period. Moreover, long-term inflation expectations have been stable and well anchored at levels broadly consistent with the definition of price stability, as shown by the evidence coming from surveys or from indicators derived from index-linked bonds. The 318 million citizens of the euro area believe that price stability is here to stay. This is a considerable achievement that could not be taken for granted a few years ago. And the Governing Council of the ECB can claim credit for it. Concluding remarks But monetary policy is constantly confronted with new challenges and, certainly, developments since this summer (winter in this hemisphere, of course) indicate that we are not currently short of such challenges. At the beginning of July, the ECB Governing Council pointed out the risk of a potential abrupt shift in market sentiment. This risk materialised in August, although through somewhat unexpected channels. Growing default rates in the US market for subprime mortgages resulted in a loss of confidence in the valuation of structured  7  Papademos, L. (2006): “The role of money in the conduct of monetary policy”. Speech at the 4th ECB Central Banking Conference “The role of Money: money and monetary policy in the 21st century”. 6  BIS Review 132/2007  credit instruments and the disruption of the asset-backed commercial paper (ABCP) market.
Miguel Fernández Ordóñez: The monetary policy strategy of the Eurosystem Speech by Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, at the Second Summit Meeting of Central Banks on Inflation Targeting, Santiago de Chile, 14 November 2007. *  *  *  Ladies and gentlemen, Let me thank Governor Corbo for his kind invitation to speak at this Second Summit Meeting of Central Banks on Inflation Targeting, hosted by the Central Bank of Chile. It is for me a privilege and a great pleasure to be here in Santiago and to have the opportunity to address this distinguished audience. I would like to begin my intervention today by recalling two important events that took place in 1999. In that year, the Central Bank of Chile adopted a full-fledged inflation targeting strategy with a floating exchange rate. This monetary regime has served Chile well, providing a coherent and transparent framework that is credible in society at large because all the economic agents clearly understand the policy objectives and the rationale for decisions. 1999 was the same year that the Governing Council of the European Central Bank took up the responsibility for conducting a single monetary policy for the entire euro area, after a prolonged period of intensive preparations and successful economic convergence.