Price stability guarantees the purchasing power of income and the value of savings. It prevents arbitrary redistribution and fosters employment and growth. Only when prices are stable is the price mechanism – the key tool for managing supply and demand in a market economy – transparent and efficient. These findings also have a strong tradition within German economic science.
Walter Eucken (1952), one of the spiritual fathers of what is known as “Ordnungspolitik” and the social market economy, rightly described price stability – as he put it at the time, the “primacy of foreign exchange policy” – as one of the constitutive principles of a competitive order.