European Central Bank (ECB) Chief Economist Philip Lane said on Thursday at the ECB Conference on Money Markets that a "durable level of central bank reserves" is needed to guarantee "the sufficient provision of bank credit."
Without this, the Eurozone economy won't be able to achieve a "steady-state potential output growth rate," Lane cautioned. "The appropriate level of central bank reserves in the 'new normal' steady state should avoid the risks associated with excessively-scarce or excessively-abundant reserves," the policymaker explained.
Lane went on to say that whenever events that cause macro-financial stress happen, "the supply of central bank reserves should be elastic."
