Monetary policy counterparties – a case of plus ça change plus c’est la même chose?

Changes in the economic and financial landscape since the global financial crisis have brought about a profound change in the way central banks implement their monetary policy. With official interest rates coming close to their effective lower bound, central banks have tried out novel approaches like interest rate forward guidance and quantitative easing to influence inflation. They have broadly stuck however to banks as the preferred conduit through which they initiate monetary policy transmission, despite banks being subject to profound changes over the last decade. This article looks at characteristics a monetary policy counterparty should have, how financial landscape has changed in the relevant aspects over the period, and what the future monetary policy counterparty may look like.