Monetary policy
Stable prices allow consumers to plan their purchases and encourage businesses to invest. They also help to maintain confidence in the euro by stabilising the quantity of goods and services that can be bought with a given amount of money.
The goods included in consumer price indexes (CPIs) and methods used to calculate them can vary significantly from one country to another, making them difficult to compare. As a result, the Member States of the European Union created a Harmonised Index of Consumer Prices or HICP: this price index is “harmonised” in that all EU Member States use the same methodology, so data can be compared across countries.
The HICP is calculated by Eurostat and each country’s national statistics bureau, using standardised statistical methods. It takes into account expenditure by households, regardless of their nationality and residential status in the reporting country, on goods and services that directly satisfy a need.
The central bank purchases assets such as government or corporate bonds when there is a risk that inflation will remain too low. In doing so, it supports the economy by encouraging consumption and investment, which in turn puts upward pressure on prices and helps push inflation up towards the 2% target.
Climate disruption has adverse consequences for economic growth, inflation and the transmission of monetary policy to households and businesses. This undermines price stability, which is the ECB’s principal objective. This is why the ECB has included climate considerations in its monetary policy framework.
M3 includes cash (banknotes and coins in circulation) and cashless money (money stored in the form of digits in overnight deposits) that can be used immediately by means of payment instruments, remunerated deposits – which are considered to be liquid – and financial instruments with a maturity of up to two years issued by financial institutions and subscribed by savers and investors.