The economic analysis focuses on real activity and financial conditions in the economy. The economic analysis takes account of the fact that price developments over the short and medium term are influenced largely by the interplay of supply and demand in the goods, services and factor markets.
To do so, the ECB regularly reviews
The Eurosystem's staff macroeconomic projection exercises play an important role in the economic analysis. The projections, which are produced under the responsibility of the staff, help to structure and synthesise a large amount of economic data and ensure consistency across different sources of economic evidence. In this respect, they are a key element in sharpening the assessment of economic prospects and the short to medium-term fluctuations of inflation around its trend.
Asset prices and financial yields can be used to derive information about inflation expectations in the financial markets. For example, when buying and selling bonds, financial market participants implicitly express expectations about future developments in interest rates and prices. Using a variety of techniques, the ECB can analyse financial prices to extract the markets' implicit expectations for future price developments.
For more details, see www.ecb.europa.eu/mopo/strategy/ecana
MP.005 01/12European Central Bank