ABSTRACT
When established, the pre-euro Bundesbank and the European Central Bank were assigned a single primary statutory objective of ‘safeguarding the currency’ and ‘price stability’, respectively. Both central banks interpreted their primary objective in very similar terms, which are now outlined. A detailed presentation of the quantitative definition of price stability by these two institutions is presented in Chapter 3. The evolution of the statutory objectives of the Federal Reserve System is also presented here. The standard macroeconomic benefits of maintaining ‘price stability’ are explained in Box 2.1.
