Monetary policy strategy

The primary objective of the Eurosystem, which consists of the ECB and the national central banks of EU Member States that have adopted the euro, is to maintain price stability. Monetary policy’s best contribution to general well-being, in particular to high economic growth and employment, is the maintenance of price stability over the medium term.

The objective of the Eurosystem is to maintain inflation close to but below the 2% mark over the medium term. The decisions in meeting this objective are taken by the Governing Council on the basis of its interest rate strategy, and are implemented within its operational framework.

The approach to organising, evaluating and cross-checking the information relevant for assessing the risks to price stability is based on a two-pillar strategy, consisting of economic and monetary analysis. Through its economic analysis the ECB focuses on the short-to-medium-term determinants of price developments in connection with economic activity, while its monetary analysis focuses on a longer-term horizon and the link between money supply and prices. Monetary analysis mainly serves as a means of cross-checking the short-to-medium-term indications for monetary policy coming from economic analysis. The ECB’s strategy tries to formulate a monetary policy that will be the most reliable in the given economic circumstances.