In particular, the very long tenor of some of our refinancing operations combined with the full accommodation of banks’ demand for such refinancing at the prevailing rate has proven to be very powerful. Indeed, this has been effective in lowering rates along the yield curve, without having to engage in commitments on the future stance of monetary policy to steer expectations.
By providing security to our bank counterparties that central bank credit will remain in place for a sufficiently long horizon, we have acted on the liquidity premium component of term interest rates: the spread that remunerates banks lending in the inter-bank market for the risk that their borrowing counterpart may become illiquid and unable to honour the inter-bank credit contract at maturity.