Abstract
Reply of Stefan Homburg: In a previous article, Adalbert Winkler alleges that significant balances in the eurozone’s Target2 system presuppose the existence of excess reserves, and that a US style rebalancing would make it impossible for the ECB Governing Council to fulfil its mandate. Homburg shows that both allegations are incorrect. Response of Adalbert Winkler: Neither of these allegations have been made in the previous article. Thus, there is no need for any substantial revision of the claim that the introduction of ceilings on Target balances or a settlement via non-policy assets would be inconsistent with the ECB’s price stability mandate.
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