Implementation of monetary policy at the zero lower bound

The Eurosystem currently implements monetary policy in circumstances that are very different from those of the early years of the financial and debt crisis. The Governing Council of the ECB has pursued an accommodative monetary policy and lowered the central bank’s policy rates close to zero, meaning that the scope for lowering the expected real interest rate by deployment of traditional monetary policy instruments is now limited. Inflation expectations that are lower than the Eurosystem’s objective of price stability raise the real interest rate. This article looks at the non-standard monetary policy instruments with which, despite the zero lower bound, the Eurosystem has been able to steer market interest rates and strengthen expectations of a continuation of the accommodative monetary policy stance.