Monetary policy framework
The monetary policy framework of the Eurosystem comprises the general rules for Eurosystem monetary policy instruments and procedures, which are used to implement decisions made by the Governing Council of the ECB on monetary policy in the euro area in a decentralised manner. The Eurosystem’s monetary policy operations are executed under uniform terms and conditions in all member states. The Deutsche Bundesbank is responsible for implementing Eurosystem monetary policy with German counterparties.
The monetary policy framework consists of a set of monetary policy instruments: the Eurosystem conducts open market operations, offers standing facilities and requires credit institutions to hold minimum reserves on accounts in the Eurosystem. The Eurosystem monetary policy framework is designed with a view to ensuring that a broad range of counterparties can participate in monetary policy operations. Institutions subject to minimum reserve requirements may access the standing facilities and – if they fulfil additional operational criteria – participate in open market operations through standard tenders and outright purchases or sales.
Pursuant to Article 18.1 of the Statute of the ESCB, all Eurosystem credit operations (ie liquidity-providing monetary policy operations and intraday credit) have to be based on adequate collateral. The Eurosystem accepts a wide range of assets to underlie its operations and has developed a single framework for eligible collateral common to all Eurosystem credit operations.
The Governing Council of the ECB may, at any time, change the instruments, conditions, criteria and procedures for the execution of Eurosystem monetary policy operations.
Temporary non-standard monetary policy measures
Since the onset of the financial market turmoil, the Governing Council of the ECB has changed the way in which the monetary framework is used to implement monetary policy measures. As a result of the non-standard monetary policy measures agreed by the Governing Council of the ECB, all monetary policy refinancing operations are currently being conducted as fixed rate tenders with full allotment, additional longer-term refinancing operations with maturities of up to three years (indexing of interest rate to interest rates of main refinancing operations over the life of the operations) were offered, minimum reserve requirements were lowered and the collateral framework was expanded. In addition, fine-tuning operations are currently not only aimed at a restricted group of bidders, but at all monetary policy counterparties. Moreover, the Governing Council of the ECB decided to temporarily carry out outright purchases and offer foreign currency liquidity as a complement to the existing monetary policy framework.
All non-standard monetary policy measures are explicitly of a temporary nature and can be discontinued by the Governing Council of the ECB at any time. The latest press releases by the European Central Bank can be found on the ECB’s website.