REFERENCE VALUE FOR MONETARY GROWTH

In order to assess monetary developments, the Governing Council has announced a reference value for the growth of the broad monetary aggregate M3. This reference value refers to the rate of M3 growth that is deemed to be compatible with price stability over the medium term. The reference value is derived in a manner that is consistent with and serves the achievement of the Governing Council's definition of price stability on the basis of medium-term assumptions regarding trend real GDP growth and the trend in the velocity of circulation of M3. Substantial or prolonged deviations of M3 growth from the reference value would, under normal circumstances, signal risks to price stability over the medium term. However, monetary policy does not react mechanically to deviations of M3 growth from the reference value. At present, this reference value is 4½%.