Monetary policy

According to the Treaty on the Functioning of the European Union, the Eurosystem’s primary objective is to maintain price stability. Price stability, as defined by the Governing Council of the European Central Bank (ECB), is best maintained by aiming for a 2% inflation target over the medium term. This was the result of a review of the Eurosystem’s monetary policy strategy launched in January 2020. According to the ECB’s Governing Council, this inflation target is symmetric, meaning that negative and positive deviations of inflation from the target are equally undesirable. The 2% inflation target provides a clear anchor for inflation expectations, which is essential for maintaining price stability.

To maintain the symmetry of its inflation target, the ECB’s Governing Council recognizes the importance of taking into account the implications of the effective lower bound. When the economy is close to the lower bound, especially forceful or persistent monetary policy measures are required to avoid negative deviations from the inflation target becoming entrenched. This may also imply a transitory period in which inflation is moderately above target.

The Eurosystem’s monetary policy strategy provides the framework for monetary policy decisions. These build on two interdependent analyses: the economic analysis and the monetary and financial analysis. Monetary policy decisions are implemented by the national central banks of the euro area. As a member of the ECB’s Governing Council, the Governor of the Oesterreichische Nationalbank (OeNB) is closely involved in the Eurosystem’s monetary policy decisions. The Governor is not bound by any instructions in the decision-making process.

Economic analyses produced by OeNB staff support the Governor in forming opinions on monetary policy issues. These analyses focus on assessing price and economic developments in the euro area and the factors driving such developments. For Austria, the OeNB publishes economic forecasts and current economic indicators.