The Governing Council also agreed upon a guideline for the management of the foreign exchange assets by the national central banks and for the Member States’ transactions with their foreign exchange working balances. These are now being formalised in official legal documentation. (c) Statistics The Governing Council endorsed the statistical framework on the basis of a number of reports that had been prepared by the EMI - many of which had been published in the past - thereby confirming the ECB’s statistical requirements for Stage Three. I should perhaps point out that the reporting framework for the money and banking statistics of the ECB will appear in the “General Documentation” that will be released next Wednesday. (d) Euro banknotes With regard to the euro banknotes, the Governing Council confirmed (in line with previous recommendations by the EMI) that seven banknote denominations would be issued: 5, 10, 20, 50, 100, 200 and 500. Furthermore, it decided that there would not be any national features on the euro banknotes. As you know, the euro banknotes will be put into circulation on 1 January 2002. Thus there are fewer than 800 working days to go before their launch. The Governing Council took note that the technical preparations for the euro banknotes are proceeding according to schedule. The origination phase (i.e. the process of converting the designs into proof-prints) has now been successfully concluded and a zero-production run will be conducted in the autumn before mass production starts in early 1999.
An important external factor underlying the favourable prospects for inflation is the sharp decline in oil and commodity prices, which is partly associated with developments in Asia. Moreover, domestic sources of inflation, such as those arising from the labour market situation and capacity utilisation, are also relatively moderate at the present juncture. In my opinion, taking a euro area wide perspective, these views are also broadly compatible with current monetary and financial developments. In this connection, please take note that we should soon have new information on monetary developments on the basis of the new statistical reporting framework for money and banking. The environment of significant volatility in international financial markets, particularly stock markets, appears to account for much of the recent decline in long-term interest rates in the euro area to historically low levels, as investors have sought to protect themselves against heightened global risk. Nonetheless, it is notable that the euro area yield curve shifted downwards at all maturities, which to some extent would tend to indicate a further decline in long-term inflation expectations for the euro area as a whole. As we approach the start of Stage Three, we shall need to continue to monitor closely economic, monetary and financial developments within the euro area and in the world economy. This will allow us eventually to set the interest rate for the euro area as a whole.