The pre-crisis weekly liquidity provision through variable rate competitive auctions was thought to be best suited to reveal banks’ “true” liquidity demand, incentivise interbank transactions, and enhance market scrutiny of banks’ credit standing, beyond the quality of the collateral that they could pledge in our lending operations.
By acting in a firm and timely manner on the basis of our assessment, we will ensure that risks to price stability over the medium term do not materialise and that medium and long-term inflation expectations remain firmly anchored in line with price stability, which is all the more important at times of financial market volatility and increased uncertainty.