Monetary Policy Glossary

Monetary Policy Glossary

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Official interest rates of the European Central Bank 

The rates set by the Governing Council of the European Central Bank. They indicate the direction of monetary policy in the Eurosystem. At present they include: The official central rate, which serves as the minimum bid rate for principal financing operations, and the lowest rate of interest at which counterparty institutions can bid in variable-rate tenders; the interest rate of the marginal lending facility; and the interest rate of the deposit facility. The latter two rates are usually set 100 basis points above and below the official central rate, respectively.

Open market operation 
An operation executed on the initiative of the central bank in the financial markets. With regard to their aims, regularity and procedures, Eurosystem open market operations can be divided into four categories: main refinancing operations; longer-term refinancing operations; fine-tuning operations; and structural operations. As for the instruments used, reverse transactions are the main open market instrument of the Eurosystem and can be employed in all four categories of operations. In addition, the issuance of debt certificates and outright transactions are available for structural operations, while outright transactions, foreign exchange swaps and the collection of fixed-term deposits are available for the conduct of fine-tuning operations.