Bundesbank president Axel Weber said the European Central Bank must continue paying close attention to monetary growth. Weber, who is a member of the ECB's rate setting governing council, said the role of monetary growth has been one of the most criticised aspects of the central bank's strategy. But he said the ECB is fully justified in giving weight to the money supply data. "There is a well-established long-run relationship between money growth and inflation in the euro area: monetary aggregates in the euro area prove to have explanatory power for longer-term inflationary developments," he said in the text of a speech prepared for delivery at an ECB monetary policy conference. "As long as these relationships hold, there are convincing empirical reasons for paying close attention to monetary developments in the policy making process," he said. Some critics have also argued that there is no clear link between ECB rate decisions and trends in monetary growth, but Weber said this view is misplaced. The ECB looks at short-term risks to price stability in its economic analysis which is then cross-checked against monetary growth, for signs of longer-term inflation risks, under the central bank's two pillar strategy, he noted. And the ECB also has to separate out "noise" in the monetary growth data from the part of M3 growth which signals future inflation risks, he said. "Actual monetary dynamics may to a large part be driven by noise which does not necessitate a monetary policy reaction," he said. He said the portfolio shift into less risky assets, which boosted headline M3 growth after 2001, is an example of such a distortion in the data. Taking this approach has allowed the ECB to identify developments which do signal more imminent inflation risks, such as the recent strong growth in M3 money supply at a time of very low interest rates and a strong rise in loans to the private sector, he said. Weber said calls to merge the separate economic and monetary components of the ECB's two pillar strategy into a single analysis are misguided. "Given the different time horizons of the economic and monetary analysis I think that the demands that are sometimes brought up in the public debate to merge the two pillars are not convincing," he said.