ABSTRACT
This chapter begins with the objective of monetary policy which, both and on the Continent, is allocated specific responsibility for achieving and maintaining price stability. The new government in this country is clearly joined in the European consensus on the need for macro-economic stability; and it too emphasises the importance of supply-side flexibility, indeed its thinking in supply-side issues 'clearly influenced the Amsterdam Resolution. The Maastricht Treaty states that 'The primary objective of the European System of Central Banks shall be to maintain price stability. The Maastricht Treaty makes no provision for any further definition of the European Central Bank (ECB) primary objective. It is left for the ECB's Governing Council to determine how to interpret 'price stability' in any particular circumstance.
