The financial crisis changed the instruments but not the objectives of monetary policy

Abstract

Central banks have acted forcefully to provide monetary accommodation. With little room for manoeuvre for standard interest rate policy, unconventional measures have been adopted. Committing to monetary accommodation gains importance as interest rates go down and inflation expectations increasingly deviate from the target; the expectations channel of monetary policy transmission becomes key when the aim is to raise inflation expectations and improve confidence. One example of the new monetary policy instruments is the Eurosystem's expanded asset purchase programme, which demonstrates the determination of the Governing Council to return price developments to a path in line with its price stability objective.