The European Central Bank (ECB) is set to announce significant changes to its operational framework, a move that will redefine how it supplies banks with essential liquidity. This announcement, expected on Wednesday, marks a pivotal transition in the ECB's approach to monetary policy in the post-Quantitative Easing (QE) era. The changes include the introduction of a new, structural longer-term refinancing operations and adjustments to the bond portfolio, aimed at preserving the current system of steering interest rates while providing banks with more flexibility in managing their cash needs. Additionally, the ECB expects short-term money market rates to evolve in the vicinity of the deposit rate, with the spread between the main refinancing operations (MFO) and the deposit facility rate (DFR) reduced to 15 basis points from 50, signaling a strategic shift designed to limit potential volatility in short-term money market rates.
The European Central Bank unveiled a rare makeover to the inner workings of monetary policy, in a change that is technical but consequential for the economy and investors https://t.co/8N49FEvBgD https://t.co/8N49FEvBgD
💡 ECB’s Operational Framework Review: DFR Remains the Main Tool - @EconoStream on https://t.co/orvmA6Wqwk Full Story → https://t.co/LEC0KE4Wra
🇪🇺Changes to the @ECB operational framework for implementing monetary policy MFO-DFR spread reduced to 15bps from 50bps ▶️Money market rates are likely to evolve in the vicinity of DFR ▶️Limit potential for volatility in short-term money market rates https://t.co/H8d4kLFur5 https://t.co/mvikdeu2UB
The ECB presents a new framework for how it implements monetary policy, preserving the current system of steering interest rates while giving lenders more of a say over how much cash they need to operate https://t.co/LVbsSPsWej
🔴 THE ECB IS TO RUN A NEW, STRUCTURAL LONGER-TERM REFINANCING OPERATIONS AND BOND PORTFOLIO AT A LATER STAGE.
🔴 THE ECB EXPECTS SHORT-TERM MONEY MARKET RATES TO EVOLVE IN THE VICINITY OF THE DEPOSIT RATE.
Also today: Look away: the ECB is about to change its rules of engagement. ECB policymakers meet on Wednesday outside of the framework of their usual monetary policy meetings to decide the technical details about how the central bank should operate in the post-QE era. All the…
💡 ECB Insight: Framework Announcement Tomorrow Likely to Signal Start of Transition Process - @EconoStream on https://t.co/orvmA6Wqwk Full Story → https://t.co/GU4BX9dBNs
⚠️ EXPLAINER-ECB TO CHANGE HOW IT SUPPLIES BANKS WITH VITAL LIQUIDITY Full Story → https://t.co/BZykwedil9 The European Central Bank will announce on Wednesday the outcome of its Operational Framework Review, a technical but vital exercise that will set rules for how it… https://t.co/wfQud1hi0o