It may therefore directly counteract efforts by the Union to reduce greenhouse gas emissions and accelerate the transition towards a green economy. Taken together, therefore, our mandate requires a careful assessment of the extent to which the ECB can and should “green” its monetary policy operations. This is what we are currently doing under our monetary policy strategy review.
For this reason, monetary policy is transmitted through a wide variety of channels, including one that we call the "interest rate channel". Through this channel, our interest rate increases impact the costs of borrowing. This makes it more expensive for households and enterprises to take out loans. As a result, their demand for loans falls.