In particular, the Council accepted the introduction of an annual fiscal expenditure benchmark and a numerical benchmark (the 1/20th rule) for debt reduction. The fact that the Council “expects to, as a rule, follow the recommendations of the Commission, or explain its position in writing” – is a step in the right direction.
Since the mid-1990s, apart from dealing with the usual supply shocks, monetary policy had to increasingly contend with external shocks emanating from swings in capital flows, volatility in the exchange rate and global business cycles. Subsequently, increase in liquidity emanating from capital inflows raised the ratio of net foreign assets (NFA) to Reserve Money (Chart 1).