The European Central Bank
Of the 27 EU member states, 20 have the euro as their currency. In these euro area countries, the European Central Bank (ECB) is responsible for monetary policy with the objective or creating price stability and low inflation. It does this, for example, by keeping interest rates under control in countries with the euro and thereby influencing their economies. The ECB is independent and may not receive instructions from other EU institutions or governments in EU member states.
The European Central Bank
- works to create low inflation and stable prices in the 20 euro area countries
- determines the level of key interest rates in the euro area countries
- gives the euro area countries permission to issue euro banknotes
- cooperates with the national central banks in all member states
Decides on interest rates and banknotes
The European Central Bank (ECB) is the central bank for the 20 member states in the EU that have introduced the euro as their currency. The ECB is responsible for the euro area countries’ monetary policy, with the objective of price stability and low inflation. Sweden does not use the euro, therefore it does not have the ECB as its central bank.
Key interest rates for price stability in the euro area countries
The EU countries that have introduced the euro as their currency - the euro area countries - have given the ECB the right to take decisions regarding part of their countries’ economic policy, that is, their monetary policy. Monetary policy is primarily about keeping interest rates and money volumes under control in society, among other things, to promote economic development and stable prices. The ECB therefore determines key interest rates in the euro area countries. In the member states that have not introduced the euro, such as Sweden, it is the national central bank that takes these decisions. In Sweden, the Riksbank is the national central bank.
Keeps track of banknotes, banks and payment systems
As a central bank, the ECB has several tasks. For example, it gives the euro area countries permission to issue euro banknotes. The ECB also influences the euro's exchange rate, that is its value, by buying and selling the currency on the international currency market. It furthermore monitors the functioning of the euro area countries’ payment systems and banks.
The ECB has three decision-making bodies
For the management of its activities, the ECB has three decision-making bodies with different areas of responsibility and tasks:
- the Governing Council
- the Executive Board
- the General Council
All three bodies are independent. This means that they may not take instructions from anyone, such as a country's government or other EU institutions.
The Governing Council is the highest decision-making body
The Governing Council is the ECB's highest decision-making body and is led by ECB President Christine Lagarde. Its primary task is to take decisions relating to monetary policy in the euro area, that is the euro area countries. This includes decisions on key interest rates and currency reserves – reserves of gold or foreign currency that a country may use in tough economic times. The Governing Council consists of the six members of the Executive Board plus the governors of the national central banks of the euro area countries.
The Executive Board is responsible for everyday activities
The Executive Board is responsible for everyday activities in the ECB, and for ensuring that the Governing Council's decisions are implemented. The Executive Board consists of the President, Vice President and four members of the ECB.
The General Council has an advisory function
The General Council comprises the Governors of the central banks of all EU member states. Sweden is represented by Governor of the Riksbank Erik Thedéen. The President and Vice President also attend the meetings. The General Council primarily has an advisory function. It enables the Governors of the central banks of the EU countries to meet and exchange experiences. It is also responsible for paving the way for new countries to introduce the euro and for monitoring and analysing the economy in the EU countries outside the euro area.
The youngest EU institution
The ECB is the youngest EU institution and was established in June 1998. It is based in Frankfurt am Main in Germany. The ECB has been the central bank for the euro area countries since the euro was introduced as an electronic currency on 1 January 1999. On 1 January 2022, the euro was introduced in banknotes and coins in the euro area countries.