Indeed over time, I think that the “ECB watchers” have increasingly come to understand and to respect our monetary policy. We have also become better at explaining it. It is an ongoing process. But things are on the right track. Most importantly, we have done our duty. We have maintained price stability. And we have done it in a pragmatic fashion, with a steady hand. There were many who feared that in the early years of EMU, the euro area economy might be a sacrificial lamb on the altar of credibility. According to this view, the ECB would raise interest rates unnecessarily to prove its anti-inflation credentials. The facts do not bear this out. A number of shocks have hit the euro area economy over the past few years. But we did not over-react. We held our nerve. Even in its infancy, the ECB showed itself to be a mature central bank. I am proud to have been its President these past five years. *** I do not retire without some regret. There is a lot that I shall miss. I shall miss my colleagues in the Executive Board. I shall miss my colleagues in the Governing Council. I shall certainly miss the regular meetings and contacts I have with many of you, especially in the Eurogroup. I have to say that I was touched when I received your invitation to this special dinner. And I am touched that so many of you have taken the trouble to travel to Venice to say goodbye.
This past Friday we announced a plan of continued daily overnight repo operations through October 10, accompanied by three twoweek term repo operations that span the month end.1 The goal of these actions is the same as for recent open market operations: foster conditions in money markets to keep the federal funds rate within the target range. This episode reminds us all of the importance of having well- functioning markets and the vital role that the Federal Reserve plays in supplying liquidity to the system when markets are under stress. We were prepared for such an event, acted quickly and appropriately, and our actions were successful. Friday’s announcement on open market operations to address potential quarter-end funding pressures on interest rates followed this same approach: quickly diagnose the problem, develop the right action plan, and execute that plan. At the same time, it is equally important that we examine these recent market dynamics and their implications for the liquidity needs in relation to the overall amount of reserves held at the Federal Reserve. We will continue to monitor and analyze developments closely. As Federal Reserve Chair Powell stated in his most recent press conference, the FOMC will assess the implications for the appropriate level of reserves and time to resume organic growth of the Federal Reserve’s balance sheet consistent with the successful execution of the FOMC’s ample reserves framework.2 That’s enough on recent events for now. I’ll turn to another very important issue, reference rate reform.