In turn, that means that they both affect economic activity and inflation. There is therefore a need for some coordination between them to ensure that they do not operate at cross purposes. This is one reason why it is essential that the central bank is crucially involved in the formulation of macro prudential policy.
Monetary policy decisions for the euro area To explain our recent monetary policy measures, let me recall the particular role of banks in the euro area economy. The flow of credit to firms and households in the euro area works largely through banks. During recent years, about three quarters of firms’ external financing have come from that source.