Duisenberg continued by saying that “[s]uccessful and credible stability-oriented policies should help to prevent the emergence of misalignments in the future”. Exchange rate developments are naturally taken into account in monetary policy decisions inasmuch as they influence price developments. However, an exchange rate policy designed to weaken the euro intentionally would end up leading to higher inflation.
The mediumterm focus of policy means that the Bank does not try to immediately correct deviations of inflation from its target range, but aims to do so steadily over time. Strong net migration flows have contributed to higher house price inflation, especially in Auckland, which attracts over half of the net migrant flow.