monetary policy ladies and gentlemen given large central bank holdings of sovereign bonds and elevated government debt, the monetaryﬁscal interaction has become a strategic issue. it is therefore also a subject for the eurosystem ’ s monetary policy strategy review. this process is broad - based, without prejudging the outcome. what is ﬁxed is our mandate : our primary objective is to maintain price stability in the euro area. the question is how we are best able to fulﬁl this mandate in future. we are in the middle of the debate at present. it is too early to draw any conclusions. but let me share some thoughts on three issues we are looking at : the clariﬁcation of the monetary policy aim, the implications of a makeup strategy, and the measurement of inﬂation. 4. 1 definition of price stability and policy aim questions of deﬁnition often tend to be perceived as a boring formality. that is not the case in monetary policy. here, the deﬁnition of the aim is of central importance, because it forms the heart of the strategy. this is where inﬂation expectations should be anchored – not only for the ﬁnancial markets, but also for enterprises and households. https : / / www. bundesbank. de / en / press / speeches / too - close - for - comfort - the - relationship - between - monetary - and - fiscal - policy - 850120 6 / 11 11 / 5 / 2020 too close for comfort? the relationship between monetary and fiscal policy | deutsche bundesbank thus far, we have deﬁned price stability as annual inﬂation rates between zero and 2 %. within this range, the ecb governing council aims to keep inﬂation rates in the euro area below but close to 2 % over the medium term. even many experts are not familiar with this distinction between the deﬁnition of price stability and our policy aim. this suggests that our strategy should be made easier to understand on this point. the desired inﬂation rate is also something we will discuss in the governing council. we should take due account of the fact that there are several design features which could inﬂuence the level of actual inﬂation. for example, strengthening the symmetry of our aim could raise the average expected inﬂation rate. so far, the policy aim has been close to the upper edge of the range of price stability. fairly small upward deviations would violate the

13 - and, as a depoliticised money, the euro will encounter a political reality in which some people and groups still expect enormous, and fundamentally unrealistic, favours from the welfare state. both are a sign of tensions. europe ’ s future hinges crucially on how the countries resolve those tensions. facing up to competition among the countries and regions and promoting competition, more market, and more flexibility within the countries is the relatively long - term solution which fits a denationalised currency. and, for the participating countries, that means facing the associated new economic and political challenges and accepting political limitations. monetary stability is not a substitute for the right solutions. but it is the basis for them, and promotes orientation towards the future. keeping the euro enduringly stable is one of the major future tasks for europe. so that monetary union does not end like don giovanni - - namely, in a descent to hell - - but more along the lines of the marriage of figaro. which, to be sure, also leads to a series of entanglements. however, in the end, the right partners come together. that must apply to monetary union, too, even though it is not couples that are involved here, but a union with as many countries as possible.