The six-member executive board of the new European Central Bank (ECB) will hold its first meeting today to launch the final round of preparations for economic and monetary union.

While the meeting will be concerned largely with housekeeping issues and the internal job shareout, one policy issue will loom large: the choice of monetary policy instrument.

No final decision will be taken today. This will be a matter for the ECB's full council - the executive board and the 11 national central bank governors - which will meet for the first time next Tuesday.

It is considered certain that the ECB will follow the Bundesbank in adopting an intermediate monetary target - probably M3, a measure of broad money.

During the 1980s and 1990s monetary targeting fell out of fashion among financial analysts and academics. Judging by recent comments from financial analysts, it could soon stage a comeback.

Mr Thomas Mayer, European economist of Goldman Sachs, defends the use of monetary targeting at the ECB. "In our view, there are clear advantages in monetary targeting - a better chance for avoiding the build-up of an inflation potential or asset price inflation - that outweigh the technical problems associated with this strategy," he said.

He said monetary targets should be "a key guide-post in the ECB's monetary policy strategy".

The inclusion of asset price inflation is crucial. The causal link between increases in monetary aggregates and consumer price inflation has not always been stable, especially in countries with highly deregulated financial markets, such the US.

Which M3 target range will the ECB pursue?

Analysts have calculated that the ECB will opt for a tighter range of monetary growth than the Bundesbank.

Mr Joachim Fels, ECB-watcher at Morgan Stanley, calculated that M3 growth of 4 per cent would be consistent with price stability in the euro-zone. German M3 growth currently runs at almost 5 per cent.

The reason behind the discrepancy is the so-called velocity of money - the speed with which money circulates in the economy - which is higher in the eurozone than in Germany alone. Germans are more conservative savers.

Mr Fels calculates that an M3 growth rate for the euro-zone of 4 per cent is consistent with real economic growth of about 2.5 per cent and inflation of about 1.5 per cent.