However, it is imperative that medium-term upward pressure on prices be contained. The ECB has increased its interest rates in steps by a total of 225 basis points since November 1999. The gradual tightening of monetary policy was needed to preserve the prospects for price stability, thereby contributing to sustainable output and employment growth in the medium term.
A monetary policy committed to price stability is the best way to ensure that monetary policy makes its full contribution to overall economic welfare. By pre-emptively responding to threats to price stability, both sharper increases in interest rates at a later stage and pronounced swings in economic activity can be avoided.