a perspective of the economy. we have always argued that our monetary policy strategy provides for a safeguard against such short - termism. we have defined price stability as an objective that is to be maintained over a medium - term horizon. this medium - term orientation is underpinned by our monetary analysis. a key aspect of monetary analysis is the identification of low - frequency trends in inflation, as determined by monetary developments. financial imbalances that lead to excess credit growth, high leverage, loose credit standards, booming asset prices and an under - pricing of risk create the conditions for abrupt market corrections, which ultimately endanger the maintenance of price stability. analysing developments in credit, the counterpart to money on monetary financial institutions ’ balance sheets, is useful in identifying such imbalances. in situations of excessive money and credit growth, monetary policy needs to be more restrictive than warranted on the basis of short - term inflationary trends. while such a “ leaning - against - the - wind ” approach would depress short - term inflation, it would be effective in maintaining price stability over the medium to long term. it would attenuate further rises in asset prices and credit growth and thereby forestall subsequent adverse effects on price stability once a correction takes place. the governing council had already agreed in the spring of 2007 – i. e. before the crisis started – to enhance and broaden the monetary analysis along four main avenues : 1. improving and broadening money demand models to detect any possible build - up of financial imbalances ; 2. developing money - based indicators of risks to price stability ; 3. incorporating money and credit in structural general equilibrium models to signal possible financial vulnerabilities ; and 4. further deepening the framework for cross - checking between the economic and monetary analysis ( the two pillars of the ecb ’ s monetary policy strategy ). bearing these considerations in mind, it is rather straightforward to answer the questions posed by the organisers of this conference. first question : will we have a new or broadened mandate? the primary objective of the ecb is the maintenance of price stability. this mandate, which has been given to us in the treaty, will remain unchanged. the treaty also clarifies that there is no trade - off between this objective and the support that the ecb can lend to the general objectives of the community. the assignment to the ecb of specific tasks concerning the functioning of the esrb is welcome, but does not constitute an additional objective

jurgen stark : financial stability – the role of central banks. a new task? a new strategy? new tools? speech by mr jurgen stark, member of the executive board of the european central bank, at the frankfurt 12th euro finance week, session on “ restructuring the global financial architecture – the road ahead ”, frankfurt am main, tuesday, 17 november 2009. * * * introduction it is a great pleasure for me to participate in the 12th euro finance week conference which brings together such well - known experts in banking and finance. the subject of my talk, “ financial stability – the role of central banks. a new task? a new strategy? new tools? ”, will not have come as a surprise. but i should perhaps warn you that you should not be surprised either, if my answers to these questions sound rather sober to you. the severity of the economic crisis demonstrates the need to profoundly improve the functioning of the global financial system. central banks have an important role to play in making this process a success. public expectations appear to be running high on how central banks will cope with what has come to be perceived as a whole range of new tasks. where do we stand? recent economic and financial information is encouraging. the free fall in economic activity has stopped and there is hope that the global recession has bottomed out. the recovery of global trade, the rebuilding of inventories and the positive impact of policy stimulus and liquidity support measures are, at the moment, the main drivers of economic activity. moreover, money market tensions have eased, government and corporate bond spreads are declining, and stock market volatility has fallen. yet, even if confidence is slowly returning, uncertainty remains high, and economic activity and employment are likely to remain volatile for a while. are these favourable developments in economic and financial conditions genuine improvements, or are they due only to supportive fiscal and monetary policies? is the economy on a path of sustainable recovery? finding answers to these questions will demand a very close and ongoing monitoring of all economic and financial market developments over the period ahead. there are still a number of uncertainties involved, and these uncertainties will not simply resolve themselves over time. the answers largely hinge on the success of the measures taken in response to the crisis, and on the need for their being phased out in a timely manner. the response to the crisis should not sow the seeds for new imbalances. after extended discussions, we are moving closer to phasing out our liquidity measures