(Boursier.com) — The Governing Council of the European Central Bank unveils the new operational framework for implementing monetary policy to ensure that this framework remains appropriate as the Eurosystem’s balance sheet normalizes. In December 2022, the Council announced a review of the operational framework for steering short-term interest rates in the euro zone. Today’s decisions establish the key principles and parameters for the implementation of monetary policy and the provision of liquidity by the Central Bank, as excess liquidity in the banking system, while remaining significant at over the coming years, will gradually decrease.
Among the key parameters and features of the operational framework: the Governing Council will continue to guide the stance of monetary policy by adjusting the deposit facility rate (DFR); Major Refinancing Operations (MROs) will play a central role in meeting the liquidity needs of banks and will continue to be conducted through fixed rate tenders with full allocation against broad collateral and the spread between the MRO rate and the DFR will be reduced to 15 basis points from September 18, 2024.
Minimum reserve requirements for commercial lenders will remain at 1%, but may still be adjusted at a later date. The remuneration of required reserves remains unchanged at 0%.
“I am pleased to announce that the Governing Council has approved these changes to its operational framework, which recognize the significant changes in the financial system and monetary policy in recent years,” said President Christine Lagarde. “The framework will ensure that our policy implementation remains effective, robust, flexible and efficient in the future, as our record normalizes.”
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