The European Central Bank has published a review of the Eurosystem’s monetary policy instruments and implementation framework in 2024 and 2025. The paper finds that implementation remained smooth as the deposit facility rate fell by 200 basis points to 2% through June 2025 and the balance sheet continued to contract. Policy changes passed through rapidly to unsecured and secured money market rates, while declining reserves were redistributed without signs of fragmentation. Excess liquidity fell from EUR 3.4 trillion to EUR 2.5 trillion as pandemic emergency purchase programme reinvestments ended and targeted longer-term refinancing operations were fully repaid in December 2024. Monetary policy assets declined from EUR 5.1 trillion at end-2023 to EUR 3.8 trillion at end-2025, while take-up of standard refinancing operations remained limited. The revised operational framework continues to steer the stance through the deposit facility rate, with fixed-rate, full-allotment refinancing operations supplying marginal liquidity and the spread between the main refinancing operations rate and deposit facility rate reduced to 15 basis points. The review also covers the phaseout of most temporary collateral measures, the launch of the Eurosystem Collateral Management System and further integration of climate risk into collateral rules. As reserves decline, banks are expected to rely more on money markets and Eurosystem refinancing operations, while revised collateral haircuts are due to take effect no earlier than November 2026.

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