Monetary policy decisions

The single monetary policy of the Eurosystem is conducted from the perspective of the euro area as a whole. As a member of the Governing Council of the ECB, the Governor of the Bank of Finland participates in the decision-making of the Eurosystem at the highest level. The Governing Council consists of all the governors of the euro area national central banks and the six members of the ECB’s Executive Board. The members of the Governing Council are not allowed to pursue national interests; they must consider the best interests of the euro area as a whole.

The Governing Council takes monetary policy decisions in the euro area  

The Governing Council of the ECB has introduced a system of rotating voting rights. In the rotation system, euro area countries are divided into two groups according to the size of their economies, and in each group the voting rights rotate among the central bank governors. However, all governors attend the Governing Council’s meetings and have the right to speak at the meetings. The Governing Council is responsible for taking all monetary policy decisions in the euro area.

The Governing Council holds monetary policy meetings approximately every six weeks. However, it may make monetary policy decisions at any time, even outside of scheduled meetings.

At its monetary policy meetings, the Governing Council decides on the monetary policy stance required to maintain price stability in the euro area.

At its monetary policy meetings, the Governing Council decides on the monetary policy stance required to maintain price stability in the euro area in line with the ECB’s monetary policy strategy. Monetary policy decisions may relate to both standard monetary policy, such as the key ECB interest rates, and non-standard monetary policy measures, such as asset purchase programmes. Immediately after each monetary policy meeting, the ECB holds a press conference in which the President of the ECB explains the rationale for the monetary policy decision. A decision on monetary policy does not necessarily mean a change in the policy.

The monetary policy statement delivered by the ECB President at the press conference includes the monetary policy decisions taken by the Governing Council and the outlook for the euro area economy, on which the decisions are based. After reading the monetary policy statement, the President takes questions from the media.

Based on the monetary policy statement and communication by the President and other Governing Council members, the financial markets typically try to predict the direction of future monetary policy decisions. If monetary policy is assessed to tighten more than anticipated, the stance is regarded as being ‘hawkish’, whereas a stance suggesting a more expansionary monetary policy than anticipated is regarded ‘dovish’. The Governing Council may also inform the audience of future monetary policy. The aim of this forward guidance, as it is called, is to influence expectations of monetary policy.

Monetary policy accounts, which cover the discussions at the Governing Council’s monetary policy meetings, are published four weeks after each meeting, before the next monetary policy meeting. The minutes of the meetings are drafted separately and enter the public domain only after 30 years.

The Bank of Finland participates in the decision-making on the euro area monetary policy

To support monetary policy decision-making in the euro area, experts from the Bank of Finland assess economic developments and policies in the euro area and Finland and compile related background information and forecasts. Experts from the Bank are involved in the activities of the Eurosystem’s joint committees and working groups, where monetary policy analysis and decisions are prepared at expert level.

The Bank of Finland draws up and publishes an extensive forecast for the Finnish economy twice a year as part of the Eurosystem-wide macroeconomic projections for the euro area. A more limited interim forecast for the Finnish economy is published twice a year. The Bank of Finland also develops and upgrades tools used in forecasting and other economic analyses, such as statistical and macroeconomic models.

Experts from the Bank of Finland publish international peer-reviewed research articles, in particular on topics related to cyclical fluctuations, inflation, financial markets and monetary policy. Research is also conducted within the framework of many of the Eurosystem’s common research networks. Academic research supports decision-making based on the most recent scientific information at the Bank of Finland and the Eurosystem.