monetary policy, and some institutional structure with which to implement that monetary policy. the key issue is what that institution, typically a central bank, should try to achieve with its powers. i presume that those who accuse us of having become ‘ muldoonist ’ believe that we have given up our single - minded pursuit of price stability and have instead started using monetary policy to achieve other objectives, perhaps trying to help to reduce the balance of payments deficit or trying to deflate property prices. some people have of course welcomed this ‘ more pragmatic approach ’. i don ’ t think even our worst critics have accused us of manipulating monetary policy for political purposes, which of course was one of the accusations levelled against rob muldoon. so let me say it again : monetary policy has been exclusively focused on delivering low inflation in accordance with the target agreed with government ( initially 0 to 2 per cent, now 0 to 3 per cent ) since at least the time i was appointed governor, now almost 10 years ago. monetary policy remains focused exclusively on that objective. indeed, any other focus for monetary policy would be inconsistent with the legislation under which the reserve bank operates, passed without dissent in 1989. but it is important to recall that price stability was not chosen as the single objective of monetary policy because parliament thought that other objectives were unimportant. rather, by the late eighties it had become increasingly recognised here and abroad that the best contribution which monetary policy could make to those other objectives - social justice, growth in employment, growth in output - was to deliver predictably stable prices. and indeed, this point is now recognised quite explicitly in the wording of the policy targets agreement between the treasurer and myself. monetary policy aimed at stable prices assists social justice by avoiding the kind of capricious transfers of income and wealth which are the inevitable result of inflation. monetary policy aimed at stable prices assists growth in output and jobs by helping the price system, which is at the heart of the market economy, work more effectively. and monetary policy aimed at stable prices assists the economy by helping to smooth business cycles. ah, you say, he admits it : the reserve bank is using monetary policy to try to smooth the business cycle. no, i am not saying that at all. what i am saying is that when monetary policy is aimed at delivering stable prices it has the ancillary benefit that the business cycle may be smoothed to some degree also. why? because the situations where inflationary pressures

jean - claude trichet : ecb press conference – introductory statement introductory statement by mr jean - claude trichet, president of the european central bank, and mr vitor constancio, vice - president of the european central bank, frankfurt am main, 9 june 2011. * * * ladies and gentlemen, the vice - president and i are very pleased to welcome you to our press conference. we will now report on the outcome of today ’ s meeting, which was also attended by commissioner rehn. based on its regular economic and monetary analyses, the governing council decided to keep the key ecb interest rates unchanged. the information that has become available since our meeting on 5 may 2011 confirms continued upward pressure on overall inflation, mainly owing to energy and commodity prices. the underlying pace of monetary expansion is gradually recovering. monetary liquidity remains ample, with the potential to accommodate price pressures in the euro area. furthermore, the most recent data confirm the positive underlying momentum of economic activity in the euro area, while uncertainty remains elevated. overall, our monetary policy stance remains accommodative, lending support to economic activity. on balance, risks to the outlook for price stability are on the upside. accordingly, strong vigilance is warranted. on the basis of our assessment, we will act in a firm and timely manner. we will do all that is needed to prevent recent price developments giving rise to broad - based inflationary pressures. we remain strongly determined to secure a firm anchoring of inflation expectations in the euro area in line with our aim of maintaining inflation rates below, but close to, 2 % over the medium term. this is a prerequisite for monetary policy to make an ongoing contribution towards supporting growth and job creation in the euro area. the governing council today also decided to continue conducting its main refinancing operations ( mros ) as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of the ninth maintenance period of 2011 on 11 october 2011. this procedure will also remain in use for the eurosystem ’ s special - term refinancing operations with a maturity of one maintenance period, which will continue to be conducted for as long as needed, and at least until the end of the third quarter of 2011. the fixed rate in these special - term refinancing operations will be the same as the mro rate prevailing at the time. furthermore, the governing council decided to conduct the three - month