Allow me also to stress that the analysis of monetary indicators at the ESCB consists of an articulated process, whereby a detailed study of all the components and counterparts of M3 provides a detailed picture of the latest monetary developments, alongside the broad picture of the underlying trends. As I said, a world in which policy is conducted in a “data-rich environment” - to quote an article by Ben Bernanke2 - can be one in which both central bankers and other economic agents become captive to the latest macroeconomic indicator and may lose direction. In such a world, a central bank will only be successful in delivering price stability if it provides an anchor for the inflation expectations of the public and if it is as transparent as possible about its ultimate policy objective. For this reason, the ECB decided to be fully transparent about the numerical definition of its goal, price stability, that the Treaty on European Union assigned to it. As you know, in 1998, when taking up its monetary policy tasks, the Governing Council of the ECB defined price stability as a year-on-year increase in the euro area Harmonised Index of Consumer Prices of below 2% and close to 2%. The definition of price stability not only has the advantage of helping to anchor inflation expectations and to enhance the transparency and accountability of the European Central Bank. It has also been very instrumental in preserving continuity during the transition from the national currencies to the euro.

Another highly relevant area of statistical work for central bankers concerns statistics and indicators for financial stability analysis. In the aftermath of the Asian crises, which brought to the fore the importance of financial stability analysis, the related conceptual framework was strengthened and progress in understanding the genesis and propagation of financial instability was made. Central banks have an interest in financial stability issues particularly, but not exclusively, because financial stability supports sustainable price stability in the medium and long run. This implies that financial stability indicators - whether in the form of key balance sheet ratios for monetary financial institutions or leverage indices for non-financial corporations - may acquire an important status in the data set on which the central bank bases its assessment of the risks to price stability over extended horizons. The forward-looking nature of the ECB’s monetary policy strategy allows an extension of the policy-relevant horizon sufficiently into the future to factor in the likely effects of financial imbalances that may be forming. At the same time, obtaining a comprehensive and timely statistical view of the financial system helps to identify the sources of such risks. This is the rationale for central banks’ keen interest in financial stability analysis. But financial stability analysis is complex and, hence, information-intensive. Data are needed not only on the financial situation of banks, but also on that of other financial corporations, such as insurance corporations. Moreover, the financial position of non-financial corporations and households has to be carefully assessed.