[…] In sum, achieving price stability is not only important in itself; it is also central to attaining the other mandated objectives of maximum 12 sustainable employment and moderate long-term interest rates.” The ECB, for its part, aims to maintain price stability in the “medium term”, thus minimising economic fluctuation in the short term. In other words, in line with its mandate as enshrined in the Maastricht Treaty, the ECB is not indifferent to short-term economic growth trends. 2.4  Empirical results  So, on balance, what have been the factors underlying the difference in approach between European and US monetary policy? From the empirical results we see that the overall persistence of inflation is basically alike in the euro area and in the United States, even though inflexibility is far more pronounced in the euro area. Secondly, the evidence suggests that monetary policy impacts on the process whereby inflation expectations in the euro area are shaped. These expectations have remained basically in line with the quantitative definition of price stability provided by the ECB for the best part of the last ten years, and have displayed low variability, as can be seen in Table 1. Recent studies have confirmed the importance of a clear definition of price stability. For instance, the response of long-term interest rates (which should respond better to the 13 anchoring of inflation expectations) to economic news has virtually disappeared.
We know that growth in December was heavily affected by the snowy weather but there are also concerns that the economy may have slowed for other reasons. We would have to wait until April for the next quarter’s GDP data, but even when this arrives it will be a very provisional estimate. So it makes sense to look at other data sources to gauge the pace of recovery – notably the employment figures and business survey information, which also have the benefit of being less subject to data revision. The employment data broadly support the view that the underlying momentum of growth has remained healthy despite the impact of December’s weather on activity levels. Unlike the early 1980s and the early 1990s, when unemployment continued to rise in the early phases of the recovery and the jobless rate rose to over 10%, we have seen a much earlier turnaround in employment in this recovery. Employment picked up in the first half of last year and has risen by nearly 300,000 since last winter.4 More recently, jobs growth has eased off with falling public sector employment offsetting increases in the private sector. But the official Labour Force Survey unemployment rate has remained at around 8% or just below since the recovery started in the second half of 2009. Indeed, the most recent figure we have for unemployment – the claimant count number for February – indicates the lowest jobless total on that measure for almost two years.