There are other arguments for aiming at positive rates of inflation, such as the possibility of measurement bias in the price index and the inflation differentials in the euro area. Overall, our assessment is that aiming at inflation below but close to 2% over the medium term strengthens the public’s confidence that deflation need not be a concern.
The anchoring of long-term inflation expectations In the light of past experience, it is clear that the announcement of the quantitative definition of price stability, in combination with the medium-term orientation of policy, has been an extremely valuable element of the ECB’s strategy. With its quantitative definition, the ECB has made a very significant contribution to the firm anchoring of inflation expectations.