New issue of the Riksbank’s journal Economic Review

This issue of the economic review concentrates on the operational framework for implementing the monetary policy. The document is divided into three parts:
1. Detailed explanation of what an operational framework for monetary policy is
The central bank’s job is to stabilize the economy. It does so by setting interest rates, lending and buying/selling securities at different maturities than the usual market practice, ensuring that the country’s price index, employment and the financial system are stable. Therefore, the bank needs to carry out various financial activities with different counterparties at the same time.
2. Goals of the operational framework for monetary policy
Riksbank has gone through a reform, between 2019 and 2022, which reviewed the existing frameworks from 1994. The reform improved regulating interest rates, introduced flexibility in the operational framework depending on the financial markets situation – for now and the future. The results of the reform are already in-place: interest rates have been adjusted accordingly and flexibly depending on the economic situation of the country, the central bank has introduced a corridor system (overnight deposit and lending rates).
3. International comparison of the operational framework for monetary policy
The central bank operates, among others, within a corridor, floor and quota systems. The corridor system are overnight deposit and lending rates, which aim to stabilise the market. The floor system means that the bank is stabilising the market at the floor – the overnight deposit rate, while the quota system relies on the corridor system and the fact that there are two different interest rates for deposits in the central bank. This chapter focuses on the comparison of the usage of these systems across 14 different central banks globally (Americas, Europe, Asia and Pacific) for this moment, stressing that the systems can be changed dynamically if the need arises in the economy.