Monetary Policy Formulation in the Euro Area

Noyer, Christian
October 2001
Business Economics;Oct2001, Vol. 36 Issue 4, p57
Academic Journal
The primary objective and unambiguous mandate of the European Central Bank (ECB) is price stability in the euro area. The ECB's objective is to provide a stable environment that is supportive of long-term growth rather than short-term fine tuning. Policy is made by its Governing Council and implemented by its Executive Board, which instructs national banks on actions to be taken. Given the uncertainty of the future economic environment, especially with the introduction of the euro as a common currency, it is important to rely on a variety of models and approaches and on judgemental appraisal. One pillar of this approach is a focus on the relationship of inflation to monetary aggregates. The second is more general analysis of macroeconomic conditions. Combining these two pillars of monetary policy has been successful in maintaining long-term interest rates consistent with price stability.


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