Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Money Market Contact Group meeting

Frankfurt am Main, 14 March 2024

Since 2015, the Eurosystem has been operating under a de facto supply-driven floor system. This was the result of the monetary policy actions taken in the run-up to and during the pandemic to preserve price stability in the euro area.

Faced with years of persistently low inflation and the greatest economic contraction on record in 2020, we conducted large-scale asset purchases and targeted longer-term refinancing operations (TLTROs), thereby injecting a significant amount of central bank reserves into the financial system. The resulting easing of financing conditions supported economic activity in the pursuit of our mandate.

As reserves were well in excess of banks’ liquidity needs, short-term money market rates have been trading in the vicinity of the rate at which the Eurosystem remunerates overnight deposits – the deposit facility…