A monetary policy strategy for the European Central Bank

In the final rounds, the debate over the monetary policy strategy of the European Central Bank focused on the coice between monetary targeting, inflation targeting, or a mixed strategy. In the end, the Governing Council of the ECB agreed on a strategy that will assign money "a prominent role". While indicators of the inflationary stance in the Euro area will find assessment, the ECB will refuse to publish an official inflation forecast. This means that the constitutive feature of inflation targeting will not apply, nor will mixed strategy. The present paper emphasizes some general theoretical and political economy issues of the strategy choice; the general considerations are also applied to the special problems given in the case of the ECB. I will argue that inflation targeting may offer very much more opportunities for discretionary manipulation than monetary targeting does. However, recent political trends after the changeover of the German government indicate that die ECB may get under pressure in terms of questioning of its constitutional independence rather than the chosen monetary policy strategy.