In addressing these issues, we should strive to achieve as much cross-border consistency as possible on key elements of the framework. At the same time, we should also recognise that both home and host supervisors have legitimate interests that need to be met and national implementation will vary in relation to local needs.
If the key interest rate is below the natural rate, monetary policy has a stimulating effect on the economy as it encourages consumption and investment. Conversely, when the key rates are above the natural rate, this dampens demand and thus price rises. In the current environment, the ECB has brought the market rate below the level of the natural rate.