The best contribution monetary policy can make to sustainable growth and employment in the euro area is to maintain price stability in a credible and lasting manner, allowing the considerable benefits of price stability to be reaped.
When price stability prevails over the medium term, the relative price signals on which the market mechanism relies are not obscured by changes in the general price level. The market is therefore able to allocate scarce resources more efficiently to their most productive uses. The costs inflation would otherwise impose by exacerbating the distortions in tax and welfare systems are avoided.