Monetary policy impacts
Monetary policy impacts
Context
The primary objective of the ECB’s monetary policy is to maintain price stability. The ECB aims at inflation rates of below, but close to, 2% over the medium term. To this end, the ECB uses interest rates and since the 2008 crisis also non-standard measures (Asset purchase programmes, Targeted longer-term refinancing operations (TLTROs)…) to affect financing conditions in the economy.
The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility are at 0.00%, 0.25% and -0.50% respectively. The targeted longer-term refinancing operations (TLTROs) are Eurosystem operations that provide financing to credit institutions. By offering banks long-term funding at attractive conditions they preserve favourable borrowing conditions for banks and stimulate bank lending to the real economy.
In January 2015 the ECB announced a programme of public and private securities purchases which started on 9 March 2015. This is intended to boost activity in order to bring inflation to an annual rate close to its 2% target. From March 2015 to December 2018, the ECB purchased 2.6 trillion securities.
On 12 September 2019 the ECB Governing Council decided that “net purchases will be restarted under the Governing Council’s asset purchase programme (APP) at a monthly pace of €20 billion as from 1 November 2019.
Following the coronavirus pandemic, the European Central Bank’s governing council has decided on 18 March 2020 to launch created a new Pandemic Emergency Purchase Programme of up to €750bn until the end of 2020 on top of the €120b in extra purchases announced on March 12. The programme is temporary and designed to address the unprecedented situation our monetary union is facing. It is available to all jurisdictions and will remain in place until we assess that the coronavirus crisis phase is over.
The Eurofi papers presented below detail the positive and negative aspects regarding the on-going ultra-accommodative monetary policies and suggest ways out of the monetary policy deadlock.
Contributions to the policy debate
Extracted from the main Eurofi publications (Regulatory Updates, Views Magazines and Conference Summaries)
Key Eurofi
documents
Eurofi policy notes
Addressing the dangers of the monetary policy deadlock - September 2020 new
The present monetary deadlock - November 2019
The monetary policy challenge - September 2019
Key macro and micro risks that may affect EU financial markets - April 2019
Challenges and conditions for a normalisation of EU monetary policy - September 2017
The ECB’s asset purchase programme - April 2017
Monetary policy has played a major role in the run up to the financial crisis - December 2010
Public and private
sector views
Public authority views
J. de Larosière - EUROFI - Negative interest rates cannot save indebted economies - September 2020 new
Industry views
J. Gual - CaixaBank - The specter of fiscal dominance - September 2020 new
L. Bini Smaghi - Société Générale - The Pros and the Cons of the ECB policy stance - April 2017