The Bank of Finland’s Governor is a member of the Governing Board of the ECB, and in this way the Bank participates in the Eurosystem's highest decision-making body. Members of the Governing Council are the governors of the national central banks (NBCs) and the six members on the Executive Board. Since the Governing Council operates on the principle ‘one member, one vote’, each member has equal opportunity to influence decisions.
The Governing Board makes all the monetary policy decisions in the euro area. The most important decisions concern the level of key interest rates. As a rule, a decision on interest rates is made once a month, but the Governing Council may make interest rate decisions at any time, even outside scheduled meetings.
The Governing Council of the ECB convenes, as a rule, twice a month. At the first meeting of the month, normally held on a Thursday, the Governing Council usually decides on the ECB key interest rates. The most important of these is the minimum bid rate on the main refinancing operations. At the same time, the Governing Council also decides on interest rates on the standing facilities, ie the marginal lending facility and the deposit facility. Short-term markets rates follow the movements in the minimum bid rate very closely. The other key rates regulate interest rate fluctuations in the overnight rates.
All interest rate decisions are not publicly announced since an interest rate decision does not necessarily involve a rate change. The Governing Council decides either to keep official interest rates unchanged or to raise or lower them according to clearly defined needs. Normally the media draw most attention to interest rate changes.
After the first Governing Council meeting of the month, the ECB holds a press conference where the President of the ECB explains the reasons for the interest rate decision. This Introductory Statement comprises a detailed account on the factors the Council decision was based on. First, the President turns to the economic analysis and then to the macroeconomic analysis. The introductory statement also comprises assessments of fiscal policies and structural reform in the euro area countries.
After reading the introductory statement, the President is available to answer questions regarding monetary policy. On the basis of the President's answers and accentuations, journalists try to anticipate the direction of forthcoming interest rate decisions. A tight monetary policy stance, indicating a rise in interest rates, is called 'hawkish' whereas a more relaxed stance indicating a fall in interest rates is called 'dovish'. The markets closely monitor in particular the international news agencies' interpretations of the ECB's monetary policy stance.
As a rule, monetary policy announcements by the President of the ECB and members of the Governing Council, and the Governor of the Bank of Finland alike, are reported across the world, and may have an immediate effect on euro exchange rates or money market rates.