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Euro Area Policies: Selected Issues
Author:
International Monetary Fund. European Dept.
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Series:
IMF Staff Country Reports
Volume/Issue:
Volume 2023: Issue 265
Language:
English
Publication Date:
19 Jul 2023
DOI:
https://doi.org/10.5089/9798400248733.002
ISBN:
9798400248733
ISSN:
1934-7685
Pages:
18
Keywords:
ECB Policy rate; ECB balance sheet; app portfolio; C. Policy consideration; bond supply net of ECB; Financial statements; Unconventional monetary policies; Central bank policy rate; Monetary stance; Securities
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This Selected Issues paper highlights quantitative tightening (QT) by the European Central Bank (ECB). It uses evidence from the literature on the impact of central bank bond purchases and sales on bond yields, and the monetary policy stance, to outline a roadmap for reducing the Euro system’s bond holdings. The current tightening cycle provides an opportunity to revisit the ECB’s balance sheet policy. With inflation running above target, the monetary accommodation provided by the ECB’s bond holding is no longer necessary. The current tightening cycle provides an opportunity to revisit the ECB’s balance sheet policy. With inflation running above target, the monetary accommodation provided by the ECB’s bond holding is no longer necessary. The paper concludes that the ECB’s short term policy rates should be the main choice for adapting the monetary policy stance to changing circumstances and QT should proceed in a gradual, predictable manner as outlined by the ECB.
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Cover IMF Staff Country Reports
IMF Staff Country Reports
ISSN:
1934-7685
Publisher:
International Monetary Fund