2 / 5 bis - central bankers'speeches in addition, the eurosystem's balance sheet is shrinking due to the maturing of assets and repayment of the targeted longer - term refinancing operations – tltros. overall, the consolidated balance sheet of the eurosystem peaked at eur 8. 8 trillion in mid2022. since then, long - term loans from banks amounting to eur 1. 8 trillion have been repaid. in addition, securities acquired as part of the expanded asset purchase program ( app ) are slowly maturing. so, overall, the size of the eurosystem's balance sheet has decreased by around eur 2 trillion since its peak. what comes next and what does the monetary policy framework of the future look like? you may have heard of the recent discussions in the ecb governing council on the operational framework. so, the eurosystem is preparing for the period of declining excess liquidity and is adjusting its monetary policy framework accordingly. in future, the monetary policy stance will continue to be indicated mainly by the interest rate for the deposit facility ; the interest rate corridor will be narrowed in september. central bank liquidity will be provided through a mix of regular credit operations ( with one - week and three - month maturities ) and structural operations ( longer - term credit operations and securities purchases ). credit operations will return to center stage and will continue to be offered as fixed rate tenders with full allotment. but what about the natural rate of interest ( r * ), that has fallen in recent decades and is estimated now to be close to zero, albeit more recent estimates indicate it might have increased somewhat. without a re - rise in the natural rate, we seem to be confined to resort to unconventional monetary policy in a renewed form. if the natural rate r * were to be endogenous and if we could engineer a re - rise, we could return to the less distortionary conventional monetary toolbox while contributing to enhance welfare. so, how could we increase r * and which structural policy interventions are necessary? from my point of view, there are three main routes which need to be considered : first, an increase in total factor productivity, e. g. via digitalization, artificial intelligence and climate change mitigation policies ; second, an increase of the labor market participation rate ; and third, capital flows from the global north to the global south. my staff is currently preparing a paper on these del

robert holzmann : normalization of monetary policy - challenges and outlook speech by dr robert holzmann, governor of the oesterreichische nationalbank, the austrian central bank, at a reception of the austrian embassy, london, 29 april 2024. * * * dear ambassador, honorable guests, ladies and gentlemen, thank you for the invitation to today's reception in the residence of the austrian embassy and the chance to deliver some food for thought in addition to the food for the body, which is provided by the embassy, and which is equally important. let me quote winston churchill at the beginning of my deliberations, who famously said : " i am an optimist. it does not seem too much use being anything else. " there are certainly many reasons to be optimistic about ongoing global and structural developments, such as the opportunities from artificial intelligence, or the increasing awareness and efforts to achieve a successful green transition. and having an optimistic attitude is certainly good advice for the two important challenges i will talk about in my speech. the first is normalizing monetary policy in a challenging environment, the second, fostering the capital markets union in the eu to make the european capital market as successful as the one in the united kingdom. but before i delve into these topics, i would like to say a few words on the current economic situation, as i returned from the imf / world bank spring meetings just a week ago, where central bank governors and finance ministers from all over the world discussed the economic developments and the challenges we currently face. 1. global economic developments at the imf meetings, optimism, especially regarding the growth of the us economy, prevailed. however, despite global growth being resilient, it is uneven, with a robust development e. g. in the us and some emerging economies and weaker growth in europe and the uk. overall, the imf projects growth to amount to 3. 2 % on a global level in 2024, with the euro area at 0. 8 % and the uk at 0. 5 %, respectively. however, there are some significant downside risks which might hamper growth perspectives : geopolitical wars and tensions, especially in the middle east or ukraine, could increase, putting pressure on trade and commodity prices. china is showing disappointing growth – despite an above - target performance in q1 2024 – and structural challenges, e. g. in the property sector and regarding the impact of population aging, remain high.