These two assumptions imply, in the context of the staff projections, a continuation of overall contained domestic cost pressures, which contributes to the moderation in inflation projected in 2009. It has been the view of the Governing Council that the risks to this medium-term outlook for price developments are fully confirmed to lie on the upside, mainly relating to possible further rises in oil and agricultural prices, and increases in administered prices and indirect taxes beyond those foreseen thus far. In addition, against the background of sound economic fundamentals, stronger than currently expected wage dynamics may emerge, while an increase in pricing power in market segments with low competition could materialise. As regards economic activity, incoming information had confirmed the sustained nature of economic expansion in the euro area, with real GDP growing by 0.7% quarter-on-quarter in the third quarter, while indicating some moderation in the fourth quarter. Overall, the  BIS Review 3/2008  1  economic fundamentals in the euro area remain sound. Looking ahead, Eurosystem staff projects annual real GDP growth to lie between 2.4% to 2.8% in 2007, between 1.5% and 2.5% in 2008, and between 1.6% and 2.6% in 2009. In comparison with the September 2007 ECB staff projections, the range projected for real GDP growth in 2008 has been revised slightly downwards, whereas for 2007 the new range lies within the upper part of the previous one.
So it is unsurprising that Statistics Iceland's standard of living study revealed that households with onerous housing costs have declined substantially in number. About 10% of homeowners and 14% of renters consider their housing costs burdensome. This shows that debt service has risen less than could be inferred from public discourse. Just over half of households who have taken loans in the past three years have seen their debt service rise by less than 30,000 kr. per month. After adjusting for wage growth, the ratio of debt service to disposable income is broadly unchanged. As of this past January, the share of households whose debt service exceeds 35% of disposable income had risen by only 2 percentage points, from 7% to 9%. The winds are now changing in the real estate market, and the Central Bank is determined to push real rates upwards, whether through policy rate hikes or by lowering inflation and inflation expectations. This is why, in its most recent statement, the Financial Stability Committee encouraged mortgage lenders to "work with borrowers, as they have in the past, to prevent financial distress insofar as is possible." I expect that we will be taken seriously and that the banks will be prepared to respond when fixedrate clauses expire this coming winter. On the other hand, there is no reason for taxpayers to subsidise borrowers' mortgage interest expense - not at this point in time, at least.