Monetary policy

Central banks decide on monetary policy. What is it then that they decide on? They decide, for example, on policy interest rates, which again steer market interest rates, such as Euribor rates. These, in turn, have an impact on housing loans, among other things.

The Bank of Finland has no monetary policy mandate of its own; instead, the euro area is committed to a single monetary policy, for which the Eurosystem is responsible. It includes the central banks of the euro area countries and the European Central Bank (ECB) located in Frankfurt am Main. The Governing Council of the ECB is the supreme decision-making body of the Eurosystem. The membership of the Governing Council comprises the Executive Board of the ECB and the governors of the central banks of the euro area countries, such as the Governor of the Bank of Finland.

The primary objective of Eurosystem monetary policy is to maintain price stability in the euro area. If, for example, you think about planning your own finances, you can easily understand why it is a good thing that price increases remain moderate. It is definitely much easier for you to plan how to use your money if you know that prices and the value of your own savings will remain broadly unchanged. This holds true for companies, too.

For more information on monetary policy, please read this section and test with the help of the tasks what you have learnt.