Price Stability Criterion

The Price Stability Criterion refers to the goal of maintaining a stable level of prices in an economy. It means that over time, prices of goods and services should not fluctuate wildly. When prices are stable, consumers and businesses can make better financial decisions, leading to economic growth. Central banks, like the Federal Reserve, often aim for a low and stable inflation rate—typically around 2% per year—as a way to achieve this stability. This helps protect purchasing power and fosters a predictable economic environment, which is beneficial for everyone.