The Federal Reserve has a rather broad objective for its monetary policy, and interest-rate decisions are based on arguments related to an overall assessment of the cyclical position. This has led to a very expansionary monetary policy in the USA in 2001. However, the USA’s experience cannot be applied directly to Europe, since the USA’s economic structure is radically different, e.g. its labour market.
During the last 10-15 years Europe’s division of work between monetary and fiscal policy has become clearer. European experience shows that the best contribution monetary policy can make to balanced growth and development in the longer term is to safeguard price stability. Price stability provides a fixed framework for the long-term strategies of both business enterprises and consumers.