[5] Interest rates are, and will remain, the main tool for adjusting our policy stance. But we also need to normalise our other policy tools and so reinforce the impulse from our rate policy. That is why we recently decided to amend the terms and conditions of our targeted longer-term refinancing operations (TLTRO-III).
The TLTRO addressed the need for significant stimulus during the pandemic, strengthening the transmission of rates to the economy via banks. But now the environment has changed completely – and we need to ensure that the lower cost of funding the TLTRO created for banks does not impede monetary transmission when policy normalisation is required.