Interest rate policy or monetary base policy implications for.pdfVIP

interest rAte policy or monetA ry BAse policy : interest rAte policy or monetA ry BAse policy : implicAtions for A centrA l BAnk’s BAlA nce sheet implicAtions for A centrA l BAnk’s BAlA nce sheet Interest rate policy or monetary base policy : implications for a central bank’s balance sheet luc Aucremanne jef Boeckx olivier vergote * Introduction appear relevant once both types of information have been cross-checked. The primary objective of the euro area’s monetary policy is price stability. That is why the Eurosystem bases its mon- In the very short term, the Eurosystem uses its open etary policy strategy primarily on a quantitative definition market operations to steer the money market interest of price stability. The ECB Governing Council defines price rate. This implies that, in practice, the Eurosystem con- stability as a year-on-year increase in the HICP for the euro ducts an interest rate policy, which means influencing the area of less than – but close to – 2 p.c. in the medium term structure of interest rates by steering the short-term term. There can therefore be no doubt about the ultimate interest rate, and thus also influencing the real economy, objective of monetary policy, even if the medium-term the money supply and inflation. For that purpose, at the orientation of this definition provides the necessary scope