Their main policy instrument is the key interest rate or, in other words, the rate at which credit institutions may borrow from them. In addition, central banks are responsible for safeguarding the stability of the financial system. The key channel for meeting this responsibility is the provision of liquidity to the banking sector.
Central banks stand ready to use both types of instruments in times of crisis. In response to the current crisis, the traditional monetary policy instruments have, indeed, been used widely. Since last October, the ECB has lowered its key interest rate by a total of 325 basis points. At the same time, the Eurosystem has also widely used its framework of liquidity-providing instruments.