To this end, especially in a world of non-standard measures and an essential role for forward guidance, it is also vital that a central bank demonstrates that it is always seeking the most effective methods to deliver on its mandate. References Albertazzi, Ugo; Altavilla, Carlo; Boucinha, Miguel and Di Maggio, Marco (2018), “The Incentive Channel of Monetary Policy: Quasi-Experimental Evidence from Liquidity Operations”, mimeo, First Annual RTF Workshop, Frankfurt am Main. Altavilla, Carlo; Canova, Fabio and Ciccarelli, Matteo (2016), “Mending the Broken Link: Heterogeneous Bank Lending and Monetary Policy Pass-Through”, Journal of Monetary Economics, forthcoming. Benetton, Matteo and Fantino, Dadvide (2018), “Competition and the Pass-Through of Unconventional Monetary Policy: Evidence From TLTROs”, Banca d’Italia Working Paper No 1187. Bottero, Margherita; Minoiu, Cameli; Peydro, José-Louis;, Presbitero, Andrea and Sette, Enrico (2019), “Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data,” IMF Working Paper WP/19/44. Brunnermeier, Markus and Koby, Yann (2018), “The reversal interest rate”, NBER Working Papers 25406, National Bureau of Economic Research. 17 / 19  BIS central bankers' speeches  Cœuré, Benoît (2019), “The effects of APP reinvestments on euro area bond markets”, closing remarks at the ECB’s Bond Market Contact Group meeting, 12 June 2019. Demiralp, Selva; Eisenschmidt, Jens and Vlassopoulos, Thomas (2019), “Negative interest rates, excess liquidity and retail deposits: banks’ reaction to unconventional monetary policy in the euro area”, Working Paper Series, No 2283, ECB. Draghi, Mario (2019), “Twenty Years of the ECB’s monetary policy”, ECB Forum on Central Banking, Sintra, 18 June 2019.

At the same time, it is also clear that there may be negative side effects.5 Accordingly, the Governing Council will continue to assess the case for mitigating measures, which is especially relevant if further rate cuts are envisaged. Forward guidance on interest rates Our interest rate forward guidance with its state-contingent and date-based legs has become the principal tool for adjusting the monetary policy stance, especially following the end of net asset 4 / 19  BIS central bankers' speeches  purchases. The state-contingent leg expresses the anchor of our policy-setting expectations: policy rates will not be raised until we are sufficiently confident that inflation will reach levels that we consider most consistent with the ECB’s price stability objective. This, in turn, allows interest rate expectations to adjust dynamically in a data-dependent manner, which results in automatic easing if the convergence path is delayed. Through the date-based leg, the Governing Council affects interest rate expectations by expressing its views about the rate path in the near term that, given the outlook for inflation, is most conducive to reaching the objective over the medium term. This removes unnecessary uncertainty about the policy orientation over horizons that are not stretching too far into the future and prevents an unwanted weakening of the monetary policy stimulus. The evidence shows that our enhanced forward guidance has been effective. The statecontingent element is clearly understood by investors and is influencing their expectations.