Monetary policy that is set to offset short-term movements in inflation away from target – referred to as ‘strict’ inflation targeting – will result in more volatility in output and other economic variables such as employment and the exchange rate.
The Single Supervisory Mechanism will comprise national competent authorities from the euro area as well as the ECB, with the possibility of non-euro area members participating. The scope of the proposed regulation is very broad, covering all of the more than 6,000 credit institutions in the euro area. However, not all of them will fall under the direct responsibility of the ECB.