In the long run, monetary policy can only influence the price level. The objective of price stability However, monetary policy can make a fundamental contribution to a high level of sustainable growth. It relates to the second principle I was referring to above. This second principle recognises the fundamental role of price stability as a prerequisite for sustainable growth and the creation of employment.
Why is that so? The reasons are manifold. •  First, price stability enhances the efficiency of the market system in allocating resources by making it easier for economic agents to optimise their decisions. Symmetrically, price stability also prevents the considerable and arbitrary redistribution of wealth and income that arises in inflationary as well as deflationary environments, where prices change unpredictably.