What does the ECB do?
The ECB works with national central banks within the eurozone to manage inflation levels and ensure the overall stability of the euro.
The decision-making body of the ECB is the governing council, which is made up of the governors of the central banks of the eurozone countries, alongside an executive board of six ECB personnel – including the president and vice-president of the ECB – and economists.
The governing council has overall responsibility for the formulation of monetary policy within the eurozone, including any decisions relating to interest rates, central bank currency reserves and the establishment of guidelines to allow these decisions to be implemented.
Three of the most important interest rate decisions taken by the governing council are:
- The main refinancing operations – the rate banks pay when they borrow money from the ECB for one week. The bank will need to provide collateral to guarantee repayment of the loan
- The marginal lending facility – the interest rate banks pay when they borrow from the ECB overnight. The bank will need to provide collateral to guarantee repayment of the loan
- The deposit facility – the interest that banks receive for depositing money with the ECB overnight. The ECB currently has a negative deposit facility rate, meaning that banks will have to pay the ECB to deposit money with it