ECB Governing Council and Monetary Policy Decisions

The Governing Council comprises the members of the Executive Board and the Governors of the national central banks (NCBs) participating in the euro area. It is the primary decision-making body of the ECB.

Role of the Governing Council

The Governing Council formulates monetary policy in the euro area free from political interference and is required to represent the interests of the euro area as a whole. As members of the Governing Council, Governors of NCBs play a crucial role in decisions relating to monetary policy for the euro area. This supranational responsibility is underlined by voting rules of the Council whereby each member has one vote. The Statute provides that the Council acts with a simple majority of votes on major policy issues. In practice a vote may not be taken.

In the performance of their duties on the Governing Council, Governors use the expertise residing in their NCBs in the formulation of monetary policy. They take advice, but not instructions, with the result that the NCBs perform an important advisory role within the Eurosystem. In the Central Bank of Ireland, the Governor is advised and provided with a full brief on all the issues arising at Governing Council meetings and is accompanied by the Deputy Governor of Central Banking at the Governing Council meetings.

Monetary Policy Decisions

The Governing Council generally meets twice a month but assesses its monetary policy stance at the first meeting of the month. The Governing Council sets three rates; deposit facility, main refinancing operations and marginal lending facility. The monetary policy stance is steered through the deposit facility rate.

Since the  global financial crisis, the ECB  has expanded its set of policy instruments  with the aim to safeguard the primary objective of price stability and ensure an appropriate monetary policy transmission mechanism. These instruments remain part of the toolbox, and include:

  • Offering banks as many central bank loans as they need, against collateral, at a fixed interest rate;
  • Setting negative interest rates, which encourage banks to lend at low rates so that people and businesses can borrow cheaply;
  • Offering long-term loans to banks, including loans at very favourable rates, conditional on the amount of lending banks provide to people and businesses (targeted longer-term refinancing operations – TLTROs);
  • Purchasing private and public financial assets;
  • Providing “forward guidance”, where we make our intentions for future monetary policy clear.

Immediately following a monetary policy setting Governing Council meeting, the ECB issues a press release providing details of the decision. The ECB subsequently holds a press conference during which the President outlines the reasons for the actions taken.

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