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 Governing Council decided to increase this PEPP envelope by €600bn in June 2020, and by €500bn in December 2020, to a total of €1 850bn. The programme is temporary and designed to contribute to preserving favorable financing conditions over the pandemic period. It is available to all jurisdictions and will remain in place until we assess that the coronavirus crisis phase is over.

The size of the Eurosystem’s balance sheet reached a historical high of €7tr in 2020, an increase of €2.3tr compared with the end of previous year.

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.