Monetary policy instruments

The Eurosystem has a set of monetary policy instruments and procedures at its disposal to achieve its main objective of maintaining price stability in the euro area. This set forms the operational framework to implement the single monetary policy.

By using the appropriate set of monetary policy instruments the ECB:

• steers short-term money market rates by managing the liquidity situation in the money market,
• signals its monetary policy intentions by setting its key interest rates
• promotes operational efficiency and helps credit institutions meet their liquidity needs in a smooth manner.

The operational framework of the Eurosystem is based on a number of principles, which aim at:

• facilitating the efficient allocation of resources of an open economy with free competition,
• ensuring operational efficiency,
• ensuring equal treatment of financial institutions irrespective of their size and location in the euro area,
• safeguarding the principle of decentralisation of the implementation of monetary policy within the euro area,
• applying the principles of simplicity, transparency, continuity, safety and cost efficiency.

The Eurosystem monetary policy is conducted in a decentralised way: The Governing Council of the ECB takes the decisions and the national central banks (NCBs) of the euro area are responsible for their implementation.
The Eurosystem conducts open market operations, offers standing facilities and requires credit institutions to hold minimum reserves on accounts with the Eurosystem.

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