As the Eurosystem normalises its balance sheet, central bank reserves – banks’ most liquid asset – keep declining. This post examines how banks adapt to lower levels of reserves and explains why take-up in the Eurosystem’s standard refinancing operations (SROs) is expected to increase.   Central bank reserves have almost halved from a peak of €4.9 trillion in 2022 to €2.6 trillion in early 2026 (Chart 1a). While still abundant, they are unevenly spread across banks. This implies that, as the Eurosystem...

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What is the Commission proposing to change in the EU ETS Market Stability Reserve? The Commission is proposing to stop the automatic invalidation of ETS allowances held in the Market Stability Reserve (MSR) above 400 million. Instead of being cancelled, these allowances will be retained in the reserve. This strengthens the MSR's role as a buffer, improving its ability to respond to future market developments, including situations of supply tightness or excessive price volatility, while preserving the system's rules-based design. Why is the Commission...

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The resilience of the global economy is being tested by the evolving conflict in the Middle East, which has generated new inflationary pressures while creating significant uncertainty, according to the OECD’s latest Interim Economic Outlook. Global growth was steady heading into 2026, supported by the strength of technology-related production, lower effective tariffs on US imports and the momentum carried over from 2025. The energy supply shock following the onset of the conflict in the Middle East is expected to significantly weigh...

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