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Single Monetary Policy
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The Treaty on the Functioning of the European Union specifies as the primary objective of the single monetary policy the maintenance of price stability in the euro area as a whole. To fulfil this responsibility, the Eurosystem has adopted a monetary policy strategy that comprises a quantitative definition of price stability and a two-pillar approach to the analysis of risks to price stability.
Price stability is defined as annual increases in the euro area Harmonised Index of Consumer Prices (HICP) of below, but close, to 2% over the medium term.
The two-pillar approach includes two complementary perspectives: the economic analysis of short to medium-term determinants of inflation and the monetary analysis focused on the medium to long-term horizon. Cross-checking information from both perspectives ensures that no information is lost in reaching an overall judgment on the risks to price stability.