For example, in practice the information from monetary aggregates is not incorporated into conventional macroeconometric forecasting models. However, monetary analysis is an important piece of information for assessing risks to price stability from a different perspective. As the ECB’s macroeconomic forecasts rely on structural macroeconomic models, they should be seen as forming part of the second pillar of the ECB’s strategy.
These forecasts have to be cross-checked against the information from monetary aggregates for future price developments. This is the essence of the two pillar strategy. Both pillars, from different perspectives, analyse economic developments in a way which contributes to forming a judgement about risks to price stability and thus inform well-designed forward-looking monetary policy decisions.