In Europe, the systemic liquidity of the sector is supported by the European Central Bank which continues to provide liquidity on a full allotment basis, against a broad range of collateral, both marketable and non-marketable. The ECB has committed itself to continuing this flexible method of liquidity provision as long as necessary.
While interest rate can continue as the dominant instrument for implementing monetary policy, supplementing it with other quantity or macroprudential instruments even in normal times will not only enhance the flexibility of monetary policy to attain multiple objectives but could also obviate the risk of hitting the zero lower bound. I.