What is the primary objective defined by the ECB's Governing Council?

The primary objective defined by the European Central Bank (ECB) Governing Council is to maintain price stability, which is officially interpreted as an inflation rate close to, but below, 2% over the medium term. The measure used to assess this inflation target is the harmonized index of consumer prices (HICP), which provides a consistent basis for monitoring price changes across the Eurozone.

By focusing on HICP, the ECB ensures that inflation rates are comprehensively and comparably reported across member countries, enabling the Governing Council to effectively manage and communicate its monetary policy. This focus is crucial because it helps to guide expectations among consumers and investors, thereby stabilizing the economy. An inflation target of close to 2% is seen as optimal for fostering economic growth while minimizing the risks of deflation, which can have severe negative consequences for the economy.

In contrast, the other options suggest different inflation targets or definitions that do not align with the ECB's official mandate. The notion of a zero rate of inflation, while theoretically appealing to some, does not consider the necessity of moderate inflation for economic growth. A one to three percent rate could imply a lack of focus and specificity compared to the established target, and referencing individual member nations ignores the collective approach taken