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Maintenance of price stability

Monetary policy, which encompasses a number of measures influencing the cost and availability of credit, has evolved as a major tool of economic policy in many countries. A tight monetary stance, characterised by high real interest rates and lower availability of credit, is adopted to dampen aggregate demand and thereby reduce price pressures. On the other hand, a loose monetary policy stance is characterised by low real interest rates and greater availability of credit, thus favouring an expansion in aggregate demand and rising price pressures. In general, although monetary policy can stimulate output and employment in the short term, it has little effect on output growth or employment in the longer term. The international trend, therefore, has been for central banks to concentrate on ensuring price stability.

In accordance with the Treaty on the Functioning of the European Union and the Statute of the European System of Central Banks (ESCB) and of the European Central Bank (ECB), the primary objective of the Central Bank of Malta is to maintain price stability. Following the conclusion of the monetary policy strategy review in July 2021, the Governing Council of the ECB has defined price stability for the euro area as a rate of inflation of 2% over the medium term. The Central Bank of Malta contributes to Eurosystem monetary policy decisions through the participation of the Governor in the Governing Council of the ECB.

In performing its tasks, the Central Bank of Malta operates autonomously and independently, in compliance with the applicable provisions of EU and Maltese law. The Bank also seeks to be transparent and publicly accountable.

More information on the implementation of monetary policy and the instruments that the Bank uses to carry out monetary policy can be found in the sections on monetary policy in this website.