Price stability is a goal of monetary and fiscal policy aiming to support sustainable rates of economic activity. Policy is set to maintain a very low rate of inflation or deflation. For example, the European Central Bank (ECB) describes price stability as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the Euro area of below 2%. However, by referring to "an increase in the HICP of below 2%" the ECB makes clear that not only persistent inflation above 2% but also deflation (i.e. a persistent decrease of the general price level) are inconsistent with the goal of price stability.[1]
In the United States, the Federal Reserve Act (as amended in 1977) directs the Federal Reserve to pursue policies promoting "maximum employment, stable prices, and moderate long-term interest rates".[2] The Fed long ago determined that the best way to meet those mandates is to target a rate of inflation of around 2%; in 2011 it officially adopted a 2% annual increase in the personal consumption expenditures price index (often called PCE inflation) as the target.[3] Since the mid-trend 1990s, the Federal Reserve's measure of the inflation trend averaged 1.7%, a mere 0.3% shy of the Federal Open Market Committee’s 2% target for overall PCE inflation. Trend inflation as measured by the price index of core personal consumption expenditures (PCE) – that is, excluding food and energy – has fluctuated between 1.2% and 2.3% over the past 20 years.[4]
In managing the rate of inflation or deflation, information and expectations play an important role, as explained by Jeffrey Lacker, President of the Federal Reserve Bank of Richmond: "If people expect inflation to erode the future value of money, they will rationally place a lower value on money today. This principle applies equally well to the price-setting behavior of firms. If a firm expects the general level of prices to rise by 3 percent over the coming year, it will take into account the expected increase in the costs of inputs and the prices of substitutes when setting its own prices today."[5]
^""The definition of price stability", European Central Bank, on line (April 5 2017)". Retrieved 5 December 2017.
^Public Law 95-188 (Nov. 16 1977).
^"The Fed's plan to hike interest rates". The Economist. Retrieved 5 December 2017.
^Cecchetti, Stephen; Schoenholtz, Kim (28 March 2017). "The Fed's price stability achievement: A case for Federal Reserve independence". Retrieved 5 December 2017.
^"The Outlook for Inflation and Inflation Expectations - Speech, Jeffrey M. Lacker, March 21, 2016 - Federal Reserve Bank of Richmond". www.richmondfed.org. Retrieved 5 December 2017.
Pricestability is a goal of monetary and fiscal policy aiming to support sustainable rates of economic activity. Policy is set to maintain a very low...
In game theory, the price of stability (PoS) of a game is the ratio between the best objective function value of one of its equilibria and that of an optimal...
macroeconomic thinking, apparently offering a stable trade-off between pricestability and employment. The curve was interpreted to imply that a country could...
clearly defined the objectives of the Bank of Japan as 'pricestability' and 'financial system stability'. This revision affirmed the Bank's operation independent...
conditions to accomplish broader objectives like high employment and pricestability (normally interpreted as a low and stable rate of inflation). Further...
Amsterdam in May 1999 with the purpose of guaranteeing and maintaining pricestability. On 1 December 2009, the Treaty of Lisbon became effective and the...
percent) agreed that a return to the gold standard would not improve price-stability and employment outcomes, and two-thirds of economic historians reject...
banking union. The primary role of central banks is usually to maintain pricestability, as defined as a specific level of inflation. Inflation is defined...
the 1980s, OPEC has had a limited impact on world oil-supply and oil-pricestability, as there is frequent cheating by members on their commitments to one...
The bank's primary purpose is pricestability. For that, the bank targets inflation. The 2016–18 target is consumer price inflation of 2.0%. The Bank of...
to support long-term growth of the economy is to maintain pricestability, and pricestability is achieved by controlling inflation. The central bank uses...
unemployment. Proponents say that this activity can be consistent with pricestability because it targets unemployment directly rather than attempting to...
Index of Consumer Prices (HICP) is an indicator of inflation and pricestability for the European Central Bank (ECB). It is a consumer price index which is...
meet the challenge of an increasingly complex economy, to maintain pricestability while keeping in mind the objective of growth. The Reserve Bank of...
keep prices down. The result is far less fluctuation in price.[citation needed] Pricestability then leads to greater joint welfare (the sum of consumer...
bond-buying; ...first, we were called to deliver pricestability! ... We have delivered pricestability over the first 12–13 years of the euro! Impeccably...
inflationary pressures, creating greater pricestability. The August 6 invasion was seen as a direct threat to the pricestability the Fed sought. In fact, the Council...
Foundation. He was also the first head of the Council on Wage and PriceStability, a short-lived federal agency. Born in New York City, Rees earned his...
an economic policy proposal that aims to create full employment and pricestability by having the state promise to hire unemployed workers as an employer...
objective of the European Central Bank and other central banks ought to be pricestability. This has been criticised for apparently being superior to the objective...
States are obliged to adhere to the Stability and Growth Pact (SGP), which serves as a framework to ensure pricestability and fiscal responsibility, has adopted...
maintaining pricestability. In the 21st century the bank took on increased responsibility for maintaining and monitoring financial stability in the UK...
demand in the economy, so that certain economic goals can be achieved: Pricestability; Full employment; Economic growth. The Keynesian view of economics...
stabilize the domestic price level. He argued that the Bank of England had the policy tools available to provide a semblance of pricestability through its stance...
monetary policy stance. Stable prices is the main criteria for monetary stability. Stable prices are maintained by making sure price increases meet the Government's...
Swiss franc banknotes. The primary goal of its mandate is to ensure pricestability, while taking economic developments into consideration. The SNB is...
volume of money supplied in the economy in order to ensure monetary and pricestability. The Currency Operations Department of the CBN is in charge of currency...
financial organisations (EU, IMF, OECD, BIS). Its principal aim is pricestability, but it is also responsible for issuing the national currency, the...
in the custodian of the backing asset is crucial for the stability of the stablecoin's price. If the issuer of the stablecoin lacks the fiat necessary...
Global Information