It is an important input in a strategy of “leaning against the wind”. Finally, monetary policy follows a so-called “Separation principle”, which distinguishes decisions about the monetary stance aimed at achieving price stability from tools directed at implementing monetary policy decisions through liquidity management. With these principles in mind, let me turn to the monetary policy responses to the crisis.
At a very general level, the ECB used conventional tools – an aggressive easing of the policy rate – to counter deflationary pressures and unconventional tools, which aimed at restoring a well-functioning transmission mechanism. These policies were pursued in four phases. 1.