The staff of the ECB and the national central banks have already been providing twice-yearly projections to the Governing Council since the start of Monetary Union. Starting with the December 2000 issue of the ECB Monthly Bulletin, these projections are now regularly made available to the public alongside other indicators and other forms of analysis underlying the ECB's monetary policy decisions. Let me emphasise that the publication of projections reflects the ECB's commitment to openness and transparency in sharing the information and analyses underlying its monetary policy decisions. Furthermore, it does not in any way change the ECB's monetary policy strategy. The projections are only one element of the second pillar considered by the Governing Council. Economic projections can only provide a partial summary of the state of the economy. They cannot possibly contain all the information needed to take appropriate policy decisions. In particular, the results do not in themselves reveal the nature of a shock hitting the economy. The appropriate monetary policy to maintain price stability should always depend on the specific circumstances and the nature and magnitude of a threat. For example, the appropriate response to a one-off increase in oil prices may differ from that given to a wage-price spiral, even if both have the same impact on inflation projections. Therefore, projections must always be supplemented by economic assessments and a detailed analysis of individual indicators. The ECB's strategy has sometimes been criticised for being rather complex. However, we are convinced that a simple approach would not have been appropriate.
The prominent role of money is signalled by the announcement of a reference value for the annual rate of growth of the broad monetary aggregate M3. This reference value represents a visible public commitment to analysing and explaining monetary developments and their implications for price stability in detail. In December 2000, the Governing Council of the ECB reconfirmed the reference value of 4 1/2% annual growth. This rate should be consistent with price stability in the medium term. While the reference value plays an important role in monetary analysis, the assessment of the first pillar goes beyond the evaluation of the deviation of M3 growth from the reference value. It encompasses a variety of approaches which assign a central role to money because of the ultimately monetary nature of inflation, as well as a detailed analysis of the components and counterparts of M3. Thus, an in-depth analysis of the overall liquidity conditions in the euro area is provided. BIS Review 10/2001  1  Despite broad consensus on the fact that inflation is ultimately a monetary phenomenon, the assessment of monetary developments alone does not give an accurate picture of the state of the economy and of the potential risks to price stability. Therefore, for a robust strategy, it is useful to analyse additional indicators relevant for future price stability and to combine them under a second pillar.