I will then explain why I think constrained discretion is the best operating framework for monetary policy, and in particular why it constitutes the best approach for achieving the economic goals that the Congress has set for the Fed. Finally, I will briefly discuss the close relationship between constrained discretion and the strategy for monetary policy known as inflation targeting.
The Treaty establishing the European Community unambiguously lays down that the overriding objective of the single monetary policy is to maintain price stability in the euro area. This reflects the notion that the best contribution that monetary policy can make to sustainable long-run economic growth and rising standards of living is to maintain price stability.