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Monetary policy glossary

national central bank (NCB)

A central bank of an EU Member State.


See national central bank (NCB)

NCB business day

Any day on which the national central bank of a specific Member State is open for the purpose of conducting Eurosystem monetary policy operations. In some Member States, branches of the national central bank may be closed on NCB business days owing to local or regional bank holidays. In such cases, the relevant national central bank is responsible for informing the counterparties in advance of the arrangements to be made for transactions involving those branches.

negative interest rate policy (NIRP)

The decision to lower the ECB’s deposit facility rate to a level below zero to counteract disinflationary forces. Like most central banks, the ECB generally acts against too high inflation by raising interest rates, making it more expensive to borrow and more attractive to save, and against too low inflation by cutting rates, making it less expensive to borrow and less attractive to save. In June 2014, in the face of inflation likely to be persistently below its objective, the ECB cut the deposit rate to a negative level for the first time. The Governing Council always assesses the proportionality of monetary policy measures, looking at the benefits, possible side effects, the interaction of the measures and their balance over time. See also deposit rate

neutrality of money

A basic economic principle stating that in the long run changes in the money supply only lead to changes in nominal variables but not in real variables. Changes in the money supply will therefore have no long-term effect on variables such as real output, unemployment or real interest rates.

new monetary policy instruments

New instruments that have proven to be effective in countering disinflationary pressures, introduced by the ECB since the financial crisis. While the primary monetary policy instrument is the set of ECB policy rates, in recognition of the lower bound on policy rates the new instruments will remain an integral part of the ECB’s toolkit. Together with the extension of interest rate space into negative territory, the use of instruments such as forward guidance, asset purchases and additional longer-term refinancing operations (i.e. in addition to the regular three-month longer-term refinancing operations) depends on the specific context and is calibrated with a view to reaching the ECB’s inflation target in the medium term. These instruments add to the policy space, although not unboundedly. To limit possible side effects of the new instruments, the Governing Council remains committed to continuing to perform careful proportionality assessments and to adapting the design of measures related to these instruments, without compromising price stability.


See negative interest rate policy (NIRP)

nominal effective exchange rate (EER) of the euro

Nominal euro EERs are weighted averages of bilateral euro exchange rates against the currencies of the euro area's main trading partners. The ECB publishes nominal EER indices for the euro against the currencies of a narrow and a broad group of trading partners. The weights used reflect the share of each partner country in euro area trade. See also effective exchange rate (EER) of the euro, real effective exchange rate (EER) of the euro