As a part of the Eurosystem, Latvijas Banka participates in the formulation of the single monetary policy as well as in making and implementing the related decisions, thereby fulfilling the objective of maintaining the price stability laid down in Article 127 of the Treaty on the Functioning of the European Union.
All this is done based on the principles, instruments, procedures and criteria specified in the ECB Guideline on the monetary policy of the Eurosystem.
By setting the above central monetary policy objective for the ECB, the Treaty reflects modern economic thinking about the importance of the monetary policy, its scope and limitations and forms a basis for the institutional and organisational arrangements for the participating national central banks in the euro area.
The Eurosystem also supports the general economic policy objectives of the EU, including those of ensuring sustainable economic growth and high competitiveness, to the extent that they do not prejudice the price stability objective.
An important pre-condition for successful implementation of the defined monetary policy objectives is that the national central banks should be independent of the government institutions and their decisions. Institutional independence is vital because the monetary policy has to be implemented based on the medium-term and long-term perspective and it should not be subjected to any short-term interests.
In accordance with Article 123 of the Treaty on European Union, institutional independence involves also a prohibition for a national central bank to finance any spending of the government or its institutions.
Guideline of the ECB on monetary policy instruments and procedures of the Eurosystem
Eurosystem and the ESCB
Treaty on European Union