In the review of the ECB’s monetary policy strategy that we completed last year, we were clear that both types of instrument are essential and permanent components of our toolkit. What matters is finding the combination of tools to deliver the necessary policy stance in the most effective and proportionate way.
In the ECB’s case, we currently have three main levers that we can, in principle, use to adjust policy. The first is interest rates, which have a greater influence on the short and medium-term segments of the risk-free yield curve. The second is asset purchases, which have a greater influence on the longer end of the yield curve and risk premia.