Analysis: Policy reversal? What policy reversal? Wim Duisenberg is adamant ECB monetary policy has merely been cleared up. Denis Staunton reports

As he unveiled the result of the European Central Bank's long-awaited evaluation of its monetary policy strategy yesterday, the bank's chief economist, Prof Otmar Issing, was at pains to stress that nothing had really changed. It was, he said, as if you had been happily married for four years and you decided to sit down with your spouse and examine just how good everything had been.

The ECB President, Mr Wim Duisenberg, was even more modest in his claims about the shift in strategy. It was mainly about presentation, he suggested, an effort to communicate more clearly the basis on which the ECB makes its decisions about interest rates.

But for those who have watched the ECB since it took charge of euro-zone monetary policy four years ago, yesterday's events represented an important shift of emphasis and the ECB's liberation from the Bundesbank's preoccupation with money supply, literally the amount of money circulating in the economy.

For four years, the ECB has defined price stability as "a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2 per cent".

Mr Duisenberg insisted yesterday that this definition remained valid but said that from now on, the ECB "will aim to maintain inflation rates close to 2 per cent in the medium term".

Both Mr Duisenberg and Prof Issing acknowledged that one motivation for the change was to make clear that the ECB was aware of the danger of deflation and to take account of the impact of divergent inflation rates throughout the euro zone. What they did not say was that, in softening its language on inflation, the ECB is weakening one of the restraints inhibiting a more flexible interest rate policy.

The ECB is unusual among central banks in having a monetary policy based on two "pillars" - money supply and inflation. The importance of money supply was an article of faith for the Bundesbank, on which the ECB was broadly modelled. But critics have complained that the ECB's reliance on two forms of data was confusing and rendered its monetary policy incoherent.

Prof Issing argued yesterday that the link between money and prices in the euro zone has been proven beyond doubt and that, although inflation figures offer a short-term picture of the level of price stability, a study of money supply offers a longer term view.

In his monthly statement to the press in Frankfurt, Mr Duisenberg has until now begun with an analysis of money supply - the ECB's "first pillar" - before moving on to an economic analysis of risks to price stability. He has now reversed that procedure, starting with an economic analysis and using money supply data to "cross-check" the economic data.

The change is more than cosmetic; it represents a downgrading of the role of money supply in the ECB's decision-making and the consequent easing of another restraint on monetary policy.

Despite Mr Duisenberg's claim that the changes are consistent with the ECB's exercise of monetary policy until now, there is little doubt that the bank will find it easier to justify lower interest rates in terms of its internal philosophy. With growth sluggish throughout much of the euro zone and a growing number of Europeans on the dole, yesterday's changes represent a small glimmer of hope from Frankfurt.