ECB balance must shrink but not too much: Lane

The European Central Bank’s balance sheet needs to be much smaller but cannot shrink back to levels seen in its early years, ECB chief economist Philip Lane said on Thursday, just as policymakers are discussing a new operational framework.

“The appropriate level of central bank reserves can be expected to remain much higher and be more volatile in this new steady state compared to the relatively-low levels that prevailed before the global financial crisis,”
“Even if much lower than the current level, 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,”

This article was written by Ryan Paisey at www.forexlive.com. Source