On May 8 the European Central Bank (ECB) announced that it had adopted a new strategy. At the same time, it reinforced the main elements of its old strategy, adopted in 1998. Accordingly, the ECB continues to consider three elements as the basis for its policy decisions. There is a quantitative target for the rate of infl ation that is considered to be compatible with price stability, and projections of price stability will continue to be based on developments in the growth of the money supply (M3) and on a more broadly based consideration of other variables deemed to be important for assessing the risks for price stability. The main revisions are that the rate of infl ation regarded as desirable is still to be 2 per cent, but while 2 per cent was previously considered to be the maximum rate permissible, while no lower bound had been declared, now the rate of infl ation should be close to 2 per cent. This apparently small change is considered enough to avoid the danger of deflation in the euro-zone.
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