3. Central bank interest rates

The central bank determines the stance of monetary policy by controlling the supply and the price of money. It does so by issuing banknotes and providing liquidity (lending money) to banks, and by setting the “key” interest rates. This enables it to influence money market conditions and steer short-term interest rates. These rates and conditions are then passed on to the wider economy where they affect the volumes of, and interest rates on, loans to companies and households and, ultimately, the price level. This process is known as the transmission mechanism of monetary policy.

Key ECB interest rates

The central bank implements its monetary policy decisions by using a set of policy instruments. Traditionally the most important instruments are the official interest rates, also known as the policy rates. In the Eurosystem, the three key ECB interest rates are: (1) the rate on the main refinancing operations, which determines the interest rate applied in the regular lending operations conducted by the Eurosystem to provide liquidity to the banking system; (2) the deposit rate, which is the rate banks receive for depositing money overnight with the Eurosystem; and (3) the rate on the marginal lending facility, which determines the interest rate on overnight credit provided by the Eurosystem to banks. The deposit rate and the rate on the marginal lending facility normally form the “corridor” within which money market overnight rates fluctuate.

Statistics on key ECB interest rates

The official ECB interest rates for the euro area are decided every six weeks by the Governing Council. They are made available on the ECB’s website and in the Statistical Data Warehouse. Official interest rate data are available in two forms: either as interest rate levels or as a change, expressed in percentage points, compared with the previous rate.

On [Date 1], the interest rate on the main refinancing operations was [Value 1]%, the interest rate on the deposit facility was [Value 2]% and the interest rate on the marginal lending facility was [Value 3]%.

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