Monetary policy objectives

The primary objective of the Eurosystem’s monetary policy is to maintain price stability. The Eurosystem defines price stability as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of 2% over the medium term.

The main job of the European System of Central Banks (ESCB) is to keep prices in the euro area stable. Without prejudice to the objective of price stability, the Eurosystem also supports the general economic policies in the EU to help achieve the EU’s objectives. These objectives are laid down in Article 3 of the Treaty on European Union and, next to price stability, include: balanced economic growth and a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. The ESCB also contributes to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system.

In other words, price stability is not only the primary objective of the Eurosystem’s monetary policy, but also one of the general goals of the EU. The EU treaties establish a clear hierarchy of goals for the Eurosystem. This hierarchy documents that price stability is the most important contribution monetary policy can make to achieving a favorable economic climate and a high level of employment.