Even if our economies are slowing down, no recession lies on the horizon. Some lessons so far for the euro area The crisis is clearly not over and all the consequences of accumulated financial imbalances have not unravelled yet. However, after more than seven months, I think it is already possible to take stock of what we have learnt so far. My concluding remarks will draw tentative lessons along three main lines. 1. As regards liquidity management first, it should be emphasized that close cooperation between central banks, and notably between the ECB and the Fed has been crucial for dampening the effects of the protracted confidence crisis that has frozen up international money markets. Our coordinated actions with the Fed and other major central banks, notably to provide euro area resident banks with US dollars under swap agreements with the Fed, have clearly demonstrated our determination to act collectively to restore normal liquidity conditions in the interbank markets. Enhancing swift and complete information exchanges between central banks, and also between central banks and supervisors is certainly a continuing priority. I have to say that the French model of bank supervision, where the supervisors are inside the central bank, has shown once more its advantages in the current context. 2. As regards monetary policy, I want to stress that even a flexible policy – as inspired by risk management considerations à la Miskin – can only be implemented if needed when inflation expectations remain appropriately anchored to the central bank’s objective.
Goodhart and Tsomocos (2007). BIS Review 37/2008  1  open-market operations that we have conducted so far in the euro area (they include in particular targeted ELA to an illiquid credit institution). 2 To make my point more explicit, let me briefly recall a standard result by William Poole (1970), which implies that, when demand for central bank money is uncertain, it is optimal to stabilise the short-term interest rate, letting money supply adjust endogenously. That is precisely what has happened in the euro area over the last few quarters. Indeed, the bulk of liquidity injections since last August has merely been an attempt to align the timing and maturity of liquidity supply with changing demand within the reserve maintenance periods, in order to stabilize the very short-term interest rate on the interbank market. Of course, this is always a difficult task, since the increase in the precautionary demand for liquidity altered the behaviour of banks and rendered the forecasting models we use to calculate the benchmark need for liquidity less effective, at least temporarily. However, since the Eurosystem acted as a price-taker during these liquidity injections, it is obvious that the interest rates at which these fine-tuning and longer-term operations were settled had no information content for the monetary policy stance.