price stability

Inflation is measured as the growth of the money supply in an economy, without a commensurate increase in the supply of goods and services. This results in a rise in the general price level as measured against a standard level of purchasing power. There are a variety of inflation measures in use, related to different price indices, because different prices affect different people. Two widely known indices for which inflation rates are commonly reported are the Consumer Price Index (CPI), which measures nominal consumer prices, and the GDP deflator, which measures the nominal prices of goods and services produced by a given country or region.
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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.