Both the mandate and the strategy are based on the continental European conviction that price stability is the best contribution monetary policy can make to improving economic prospects and raising living standards. 3. The medium-term orientation avoids introducing additional, unnecessary volatility into the economy and makes it clear that monetary policy does not have the instruments to fine-tune the business cycle.
Activist policies directed at exploiting short-term trade-offs between prices and economic activity risk contributing to instability over longer horizons. 4. The ECB is pursuing a strategy of its own which cannot be compared with other strategies. The recent experience of stock market and housing market bubbles has demonstrated again that money matters. Monetary growth will remain an important element in the ECB’s economic analyses.