Definition

The European Central Bank (ECB) is the central bank for Europe’s single currency, the euro. The ECB’s main task is to maintain the euro’s purchasing power and thus price stability in the euro zone. The euro zone comprises of 17 European Union and 5 non-European Union countries that have introduced the euro since 1999.

The European Central Bank was established on June 1st, 1998 and is one of the world’s largest central banks. The European Central Bank is located in Frankfurt am Maim, Germany and is in charge of the monetary policy for the Euro, the official currency of the European Union. The Euro is currently used by twelve countries within the European Union.

The European Central Bank is governed by a board of directors, along with a board of governors but is also spearheaded by a President. The board of governors consists of members of the board of directors and representatives of local central banks existing within the ESCB (European System of Central Banks.)

The primary objective of the European Central Bank, and also of the ESCB, is to ‘….maintain price stability’ within the defined euro area; this means of course, to keep [[Inflation|inflation]] levels low and steady. Currently the present target for the level of inflation within the euro area is to maintain inflation at a level below–but still as close as possible–to the 2% mark.

In addition to this, the ECB is charged with supporting the economic policies decided upon by the European Union, although it is also charged to do this without prejudice to the objective of price stability.

Under the Treaty of Rome, the European Central Bank was also given mandate to oversee the conduct of foreign exchange operations, to deal with the holdings and management of the official foreign reserves of the euro area countries and to promote the smooth operation of payment systems.