What is the European Central Bank and what is its role?

The European Central Bank (ECB) is the institution responsible for conducting monetary policy and maintaining price stability in the eurozone, which is made up of 19 of the 27 European Union countries that have adopted the euro as their official currency. The ECB was created with the Maastricht Treaty in 1998 and began its operations in 1999.

Monetary Policies: the ECB is responsible for defining and implementing the monetary policy of the eurozone. Its main objective is to maintain price stability, which means keeping inflation low and under control. The ECB's inflation target is an inflation rate close to, but below 2 per cent in the medium term.

Currency issuance: the ECB has the exclusive right to issue euro banknotes and sets the guidelines for currency issuance by eurozone countries.

Banking Supervision: the ECB also plays an important role in banking supervision. Together with the national supervisory authorities, it monitors the eurozone's main banks to ensure the stability of the financial system.

Open Market Operations: the ECB carries out open market operations, such as purchases and sales of securities, to influence liquidity conditions in the banking system and thus affect short-term interest rates.

Economic Policymaking: although price stability is its main priority, the ECB also contributes to the formulation of the general economic policies of the European Union and the eurozone, in co-operation with other institutions.

The ECB is led by the Governing Council, which is made up of the presidents of the central banks of the eurozone countries and the members of the ECB's Executive Board. The ECB's independence is fundamental to its ability to make monetary policy decisions based on economic analyses rather than political pressure.

Source: SUPERCASA | News