PRICE STABILITY

The maintenance of price stability is the primary objective of the Eurosystem. In October 1998 the Governing Council published a quantitative definition of price stability in order to give clear guidance to expectations of future price developments and to be accountable. The Governing Council has defined price stability as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%. In May 2003 the Governing Council clarified that it aims to maintain inflation rates below, but close to, 2% over the medium term.