The Treaty on the Functioning of the European Union (TFEU) assigns responsibility for monetary policy to the European System of Central Banks (the ECB and national central banks). Article 127 of the TFEU provides that the "primary objective of the European System of Central Banks (ESCB) shall be to maintain price stability". This article goes on to say that "without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Union". While the TFEU does not give a precise definition of what is meant by price stability the ECB's 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 (but close to) 2%.
The TFEU provides, at Article 130, for the independence of the ECB, the ESCB and national central banks in carrying out the tasks and duties conferred on them by the Treaties and in particular that the "Union institutions, bodies, offices or agencies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the European Central Bank or of the national central banks in the performance of their tasks".
In this context, I should point out that inflation in the euro area has been below levels consistent with price stability for some time. The "flash" estimate shows the euro area annual rate is expected to be 0.2 per cent in December 2015 and inflation has been close to zero over 2015. The ECB's priority is to return inflation to levels consistent with price stability. In January 2015, the ECB decided to take additional monetary policy measures as it considered the prevailing degree of monetary accommodation to be insufficient to adequately address heightened risks of too prolonged a period of low inflation.
In that regard, under the ECB's Expanded Asset Purchase Programme ("Quantitative Easing"), the eurosystem (comprising the ECB and the national central banks of the euro area) has been purchasing €60 billion of public and private assets per month and plan to do so until at least March 2017, or until there is an improvement in inflation to levels consistent with price stability.