The Eurosystem’s monetary policy from 2020 was shaped by the global outbreak of the COVID-19 pandemic and the surge in inflation from 2021. This ultimately led to a series of Eurosystem policy rate hikes totalling 450 basis points (from July 2022 to September 2023).

At the start of the COVID-19 pandemic, additional asset purchases and refinancing operations were first decided on to protect the Eurosystem’s ability to fulfil its mandate in the face of the adverse impact on economic activity. On 12 March 2020, in addition to the monthly asset purchases already being made, the ECB Governing Council announced a temporary expansion of net purchases under the APP until the end of 2020. On top of this, on 18 March 2020 the ECB Governing Council launched a temporary pandemic emergency purchase programme (PEPP) with an overall envelope of €1,850 billion, the terms and conditions of which allow it to be implemented with greater flexibility than the APP. Net purchases under the PEPP were discontinued at the end of March 2022 and the portfolio has been reduced by €7.5 billion per month on average since July 2024. Reinvestments of principal payments are to be discontinued altogether at the end of 2024.

The ECB Governing Council also announced on 12 March 2020 that it would conduct additional refinancing operations under the third TLTRO series in response to the pandemic. Later, on 30 April 2020, these were supplemented by non-targeted pandemic emergency longer-term refinancing operations (PELTROs), which were extended and expanded on 10 December 2020 to the end of 2021.

In response to the repercussions of the spread of COVID-19, the ECB Governing Council also decided on 7 April 2020 to temporarily ease the eligibility criteria for collateral, followed by grandfathering the eligibility of marketable assets on 22 April 2020. In addition, the scope for accepting additional credit claims (ACCs) was extended for national central banks, and many of them made use of this option. The Bundesbank, for its part, accepted ACCs from October 2020 to June 2022.

Starting in early 2021, inflation rates rose significantly and persistently, which led the ECB Governing Council to move away from its previously accommodative monetary policy stance in the summer of 2022 and to gradually raise key interest rates up to September 2023. At its meeting of 21 July 2022, the ECB Governing Council decided to launch the Transmission Protection Instrument (TPI) to support effective transmission in the context of monetary policy tightening. The instrument’s aim is to ensure the smooth transmission of the monetary policy stance and to support the singleness of monetary policy across all euro area countries. To date, the TPI has not been activated.

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