Outside the euro area, a problem arises as the RTGS systems of non-participating countries will be connected to TARGET, whereas no central bank currently gives non-residents access to its monetary policy instruments. As a consequence, different mechanisms are being prepared in order to prevent intraday credit, if granted to non-euro area NCBs, from spilling over into overnight credit. These mechanisms include the limitation, possibly to zero, of the amount of intraday liquidity non-euro area NCBs could receive, a system of penalties and sanctions applied in case of overnight overdrafts and an early closing time for participants in RTGS systems in non-euro area countries. The decision on which mechanisms to implement will be taken by the ECB. 2.3. Foreign exchange operations Foreign exchange operations include foreign reserve assets management on the one hand, foreign exchange intervention on the other hand. The ESCB will hold and manage two different types of foreign reserve assets: •  those that will be transferred from the national central banks to the ECB; according to the Statute, the ECB shall be provided with such foreign reserve assets up to an amount equivalent to euro 50 billion; BIS Review 112/1997  -8-  •  and those that will be kept by the national central banks; the management of these foreign assets will be subject to guidelines issued by the ECB to ensure that the operations of national central banks do not interfere with the monetary and exchange rate policies of the euro area.

Incoming information, while somewhat weaker than expected, remains overall consistent with an ongoing broad-based expansion of the euro area economy and gradually rising inflation pressures. The underlying strength of the economy continues to support our confidence that the sustained convergence of inflation to our aim will proceed and will be maintained even after a gradual winding-down of our net asset purchases. At the same time, uncertainties relating to protectionism, vulnerabilities in emerging markets and financial market volatility remain prominent. Significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term. This support will continue to be provided by the net asset purchases until the end of the year, by the sizeable stock of acquired assets and the associated reinvestments, and by our enhanced forward guidance on the key ECB interest rates. In any event, the Governing Council stands ready to adjust all of its instruments as appropriate to ensure that inflation continues to move towards the Governing Council’s inflation aim in a sustained manner. Let me now explain our assessment in greater detail, starting with the economic analysis. Euro area real GDP increased by 0.4%, quarter on quarter, in both the first and the second quarter of 2018. Incoming information, while somewhat weaker than expected, remains overall consistent with our baseline scenario of an ongoing broad-based economic expansion, supported by domestic demand and continued improvements in the labour market. Some recent sectorspecific developments are having an impact on the near-term growth profile.