Exchange rate policy
The primary objective of the monetary policy of the Eurosystem is to maintain price stability. The Eurosystem has no explicit exchange rate objective. The euro floats freely on world foreign exchange markets.
Whenever necessary, the Eurosystem may counteract fluctuations in the euro exchange rate by purchasing or selling euro against other currencies. Any foreign exchange intervention by the Eurosystem is conducted in a decentralised manner between national central banks and foreign exchange counterparties.
The ECOFIN Council composed of Ministers of Finance and Economy may issue foreign exchange policy guidelines to the ECB, but these may not restrict the independent position of the European System of Central Banks (ESCB) or be in conflict with the price stability objective.
The European Central Bank holds foreign reserves for any foreign exchange operations that may be required. At the beginning of 1999, the national central banks (NCBs) of the euro area transferred part of their own foreign reserve assets to the ECB. The total transfer amounted to just under EUR 40 billion, of which gold accounted for 15%. The Bank of Finland's share was about EUR 700 million. In compensation for the transfer, the Bank has a euro-denominated claim on the ECB, on which the ECB pays interest.
The NCBs are still responsible for investing all the reserves transferred to the ECB, but the investment policy is determined by the ECB. The NCBs' own foreign reserves are managed at their own discretion.
The Bank holds reserves in order to, among other things, meet any needs of additional transfers to the ECB and other national tasks.