I am thinking particularly of the injunction to smile and whistle through all difficulties. Certainly I am sometimes tempted, when asked to explain the state of opinion in London, to take refuge in a cheery smile, and to begin to whistle a mournful tune (not easy to do at the same time, you will find). Fortunately, it is not my responsibility to discuss the politics of EMU in the United Kingdom. Another good reason for me not to do so is that I would like to keep my job. As a humble central banker, a mere technician, it is more appropriate for me to focus on the economic dimension of EMU and to say something, also, about the financial market implications which concern us, particularly given the Bank of England’s position at the heart of the City of London. In both these areas - economic and financial - the Boy Scout motto is particularly apposite today. Let me explain why. At the Bank of England we have always held the view that Economic and Monetary Union is a momentous enterprise, with huge consequences for European economies. The act of irrevocably fixing exchange rates, between economies which have in many cases been managed separately for centuries, is not a step to be undertaken lightly. It is an exciting venture, almost too exciting for some, perhaps.
These projections, which do not appear to be overly optimistic given the figures – published on Monday – for the decline in unemployment and the rise in Social Security registrations in March, highlight the need to continue pursuing policies geared to boosting competitiveness, investment and exports, the only foundations suitable for sustainable job creation. Price developments in 2015 and 2016 will be greatly influenced by oil prices. Consumer prices might fall by 0.2% on average in 2015, and rise by slightly more than 1% in 2016. Stripping out the energy component, consumer prices are expected to rise modestly, in line with the scenario of growing household expenditure, the lessening of surplus capacity in the economy and the depreciation of the euro. The risk of deflation appears to have been clearly averted in the Monetary Union and, consequently, in Spain. Recent monetary policy conduct Let me turn now to recent monetary policy conduct. Monetary policy in the euro area has been progressively adapted to medium- and long-term inflation expectations, in a setting marked by the weakness of economic growth in the area. The armoury of instruments used by the ECB includes conventional or standard measures – such as interest rate movements and the provision of liquidity in its ordinary refinancing operations – together with non-standard or extraordinary measures, among which the setting of negative interest rates on the discount facility, and long-term liquidity-provision and assetpurchase programmes. The need to keep the deflationary risk at bay, i.e.