The first 5 years of monetary policy of the ECB
1. Introduction
Since 1 January 2001 the euro is the currency of 12 European countries. Only three of the European Union (EU) Member States, Denmark, Sweden and the United Kingdom have refused to introduce the euro. Four years earlier, on 1 June 1998, the European Central Bank (ECB) was established to be in charge of
monetary policy for the Euro area. The introduction of the euro and the establishment of the ECB were both realizations of the European Monetary Union. Three individual stages should lead to this European Monetary Union.
1. (1990) Restrictions on the movement of capital between Member States were abolished.
2. (1994) Strengthen central bank cooperation and monetary policy coordination and preparations required for the establishment of the European System of Central Banks (ESCB), consisting the ECB and the local national central banks of all EU Member States.
3. (1999) fixing of the exchange rates of the currencies of the Member States participating in Monetary Union.
The ECB was now legally responsible for the conduct of the single monetary policy in the Euro area. To sum these stages up, the ECB is the central bank for Europe's single currency, the euro. The ECB's task is to maintain the euros purchasing power, thus obtain price stability. This paper will describe the ECB's monetary policy strategy and its individual monetary policy instruments. Finally the paper will describe the direction and actions of the monetary policy in the Euro area of the first five years (1999-2003).
2. Objective of the monetary policy
The primary objective of the ECB is price stability ...