Schnabel outlines path to a leaner balance sheet and more flexible policy
- APP and PEPP portfolios can run down to zero unless rates return to the effective lower bound
- Structural longer-term loans would come first; a securities portfolio could follow as legacy holdings shrink
- Weekly fixed-rate refinancing to meet bank liquidity demand; sustained higher take-up would signal lasting needs
- Energy shock has pushed medium- and long-term inflation expectations away from 2%
- Pandemic-era forward guidance was “too Odyssean”; policy rates offer more flexibility than asset purchases