The European central bank (ECB) is the central bank of the euro area. It was created July 1, 1998 and seat in Frankfurt in Germany, it is currently directed by Mr Jean-Claude Trichet (France) which succeeded on November 1, 2003 Mr Win Duisenberg (Netherlands). The European central bank is independent of the political power. Its objective n°1 is to maintain the price stability (objective defined in article 105 of Maastricht), i.e. inflation under the threshold of 2%. If this objective is not threatened, it can give its support for the general policies of the Community countries (envisaged in article 2).
The European central bank is composed of the directory (the president, the vice president and 4 qualified personalities). These 6 people are named by the European Council which is the highest authority that currently the European Union has. It is thanks to the nomination by the European Council of the 6 members of the directory that the central bank draws its legitimacy like its credibility.
The directory is the tactical authority of the European central bank, it is charged to put in œ uvre the decisions of monetary policy stopped by the council of the governors (governors of the national central banks of the euro area and the members of the directory).
The council of the governors is him charged to make the decisions of monetary policy. To make these decisions of monetary policy, it is pressed on 2 pillars of analysis: an economic pillar of analysis (thanks to variables economic, monetary, financial such as foreign exchange rate, the growth, the rate of debt, the budget deficit … giving information on the evolution of inflation) and a monetary pillar of analysis with the follow-up of the evolution of the monetary aggregates, mainly m3 (currency of transaction + short-term saving + long-term saving) which is the least informative on future inflation, however, this strategy was effective historically, in particular for BundesBank.
The ECB submits each year an annual report to the European Parliament, the governor of the European central bank is him auditioned by the economic and monetary committee of the European Parliament once per quarter. However, the European Parliament does not have any possibility of sanction on the ECB.All second Thursdays of the month, the governors of the national central banks of the euro area meet in Frankfurt to make the decisions of monetary policy. The day before, all the governors meet in an abstract way.
When the decision is made towards 14:00, 15:00, measurement is quasi immediate and information is retransmise with the whole of the international community at the same time. To manage an agreement on the European monetary policy, the rule is the simple majority, a man, a way. The European central bank chose the maximum delay to announce the reasons of decision making (30 years …).
For comparison, in the United States, one knows the reasons of decision making 1 month and half afterwards. The bank of England reveals it afterwards its reasons 2 weeks.
The European Central bank controls very interest rate with short term (the EONIA: European Over Night Average Index). But they are of course the reactions of the economic agents vis-a-vis these rates which make that the monetary policy is effective or not. It is thanks to this rate that the ECB tries to engage certain mechanisms.
Since its creation, the ECB follows a rather expansionist policy, accommodating thanks to low interest rate. The monetary policy of the European central bank thus clearly supported the growth since the beginning of the years 2000.( Finance Information City )
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