Real Rules for Monetary Order

The words “money” and “constitution” are not often heard in the same sentence. Given, however, the role played today by institutions like the Federal Reserve, the European Central Bank, and the Bank of England in tackling questions that go far beyond monetary policy’s traditional parameters, more than one person has suggested that central banks effectively function as a fourth branch of government and that this fact should be given constitutional recognition.

In the ECB’s case, its powers received a type of constitutional affirmation in the Treaty on European Union. This establishes the ECB’s independence and defines its “primary objective,” according to Protocol (No 4), Chapter 2, Article 2, as “price stability.” The same article also specifies that “Without prejudice to the objective of price stability, it shall support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union as laid down in Article 3 of the Treaty on European Union.”

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