Monetary policy

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.

The implementation of Eurosystem monetary policy is undergoing a transition as the volume of central bank reserves – or liquidity – declines. In the future, monetary policy implementation and interest rate steering will rely on both a well-functioning money market and banks’ demand for Eurosystem refinancing operations.