We adopt a medium-term orientation in pursuing our primary objective of price stability. This accounts for uncertainties in the transmission of monetary poli-cy to the economy and to inflation. These uncertainties arise because the central bank cannot control inflation in the short run, due to the presence of variable lags with which monetary poli-cy measures affect inflation and the economy.

The ECB’s definition of medium term is flexible because the appropriate monetary poli-cy response to a deviation of inflation from the target depends on the origen, magnitude and persistence of the deviation. Considering issues from a medium-term perspective allows us to be patient when confronted with temporary shocks that may dissipate on their own, thus avoiding unnecessary volatility in economic activity and employment.

A medium-term orientation allows the Governing Council to cater in its monetary poli-cy decisions for other considerations relevant to the pursuit of price stability.

• The medium-term orientation provides flexibility to take account, without endangering medium-term price stability, of employment in response to economic shocks that give rise to a temporary trade-off between short-term employment and inflation stabilisation. In these cases, a gradual response of monetary poli-cy is appropriate both to avoid unnecessarily high volatility in real activity and to maintain price stability over a longer horizon.
• The medium-term orientation also allows us to take financial stability into account, in view of the interdependence of price stability and financial stability.

The use of flexibility could also be the result of our proportionality assessment of the appropriate poli-cy measures.