Second, banks can increase the size of the precautionary balances or buffer they hold with the Bank by altering their reserves targets in our voluntary reserves system. 3 And, third, in the face of, say, a  1  “Managing the central bank’s balance sheet: where monetary policy meets financial stability”, Lecture to mark the fifteenth anniversary of Lombard Street Research, London, July 2004, Bank of England Quarterly Bulletin, Autumn 2004, pp359-382. 2  So I am using the expression in its older, broader sense, not narrowly to mean bespoke support operations. 3  Under the Bank of England’s Sterling Monetary Framework, individual reserves banks choose each month a level of reserves they wish to target on average over a month-long maintenance period running between Monetary Policy Committee meetings. The Bank supplies, via OMOs, the resulting aggregate level of reserves. In stressed circumstances, the Bank can permit a revision to the target during the monthly  BIS Review 67/2009  1  9/11-type event that disrupted the financial infrastructure and effectively closed the money markets, the Bank could temporarily substitute itself for the markets by allowing banks to borrow from, and deposit with, us at no charge relative to Bank Rate. 4 Beyond monetary policy All of those contingencies involve events affecting either the demand for reserves or their distribution around the system. And the measures designed to cope with them are therefore part and parcel of the Bank’s management of the banking system’s day-to-day sterling liquidity in the course of implementing monetary policy.
François Villeroy de Galhau: Monetary policy in the present environment - reconciling clarity and flexibility, as well as independence and cooperation Remarks by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Group of Thirty's annual International Banking Seminar, Bali, Indonesia, 14 October 2018. * * * Good morning. Let me begin by thanking the organisers of this seminar for the opportunity to speak on such a distinguished panel. I’d like to elaborate on two challenges. The first is domestic and concerns how we, as Euro-area central bankers, decide and communicate about the gradual normalisation of our monetary policy in uncertain times. The second challenge is a collective one: how we co-ordinate facing diverging economic paths. ** 1. Our domestic challenge in the euro area: combining clarity and flexibility The Euro-area is experiencing a broad-based economic expansion. Q2 2018 was the 21st successive quarter of economic growth. 9.2 million jobs have been created since 2013 and the unemployment rate has fallen from 12.1% to 8.1%, although this figure is still too high. There are increasing signs that the labour market is tightening and nominal wage growth is picking up: the Phillips curve is back to work, albeit a bit later than expected. The output gap was probably closed by the end of last year.