Bank of Finland Bulletin - Articles on the economy from the Bank of Finland
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The amount of liquidity in the banking system has been declining as assets acquired under the European Central Bank’s purchase programmes mature. As liquidity declines further, banks will have a growing demand for the Eurosystem’s standard refinancing operations. When this demand grows sufficiently, the supply of liquidity will be supplemented with new structural refinancing operations and asset purchases in a structural bond portfolio.
When inflation rises into the 5-6% range, firms may reprice more frequently just as households begin revising expectations more aggressively. These channels can reinforce one another, making early and credible policy action more valuable.
To ensure that the steering of money market interest rates remains effective in an ever more digital world, it is essential that central bank money continues to be an anchor for the financial markets. This requires TARGET Services that adapt to changing times, monetary policy instruments that are flexible, and a collateral framework that takes account of innovations.
