2014, the governing council introduced a negative deposit rate of – 0. 1 %, and reduced it by a further 10 basis points in september 2014. this marked the first round of cuts into negative territory and was viewed as a way of providing additional stimulus to the economy as it extended the scope of conventional monetary policy. over the same period, a credit easing package was announced which included targeted longerterm refinancing operations ( tltros i ), a third covered bond purchases programme ( cbpp3 ) and an asset - backed securities purchase programme ( abspp ). 1 the overarching motivation underpinning the design of this package was twofold. first, to improve the pass - through for each euro of liquidity injected into the financial system to private sector borrowing costs and second, to reinforce the accommodative monetary policy stance. credit easing measures influence the economy via three main transmission channels : direct pass - through, portfolio rebalancing and signalling. 2 the direct pass - through channel is the most prominent one. it directly lowers banks borrowing costs, which in turn lower lending rates for firms and households, and this supports consumption and investment. in the case of the tltros i, which were specifically aimed at encouraging bank lending to the private sector in an environment of deleveraging, banks were able to borrow at a very favourable interest rate from the eurosystem. the cheaper funding costs were intended to increase competition in the market for bank loans, which would consequently lower borrowing costs for firms and households. for the cbpp3 and abspp, purchases increase the demand for these securities and as a result lead to higher prices and lower yields. as these securities are backed by loans to firms and households, the price increase encourages banks to issue more loans so that they can be used to issue more asset - backed securities and covered bonds. this increase in loan issuance also fosters competition and lowers borrowing costs for firms and households. at the beginning of 2015, the inflation outlook had deteriorated and there was an increasing risk of a too prolonged period of low inflation. as a result, in january 2015 the governing council announced the expanded asset purchase programme ( app ), which encompassed the cbpp3 and the abspp as well as the introduction of a public sector purchase programme ( pspp ). the monetary stimulus from the pspp works through several transmission channels, but the most 2 / 4 bis central bankers'speeches powerful is via portfolio rebalancing.

christine lagarde : remarks at g30 dinner remarks by ms christine lagarde, president of the european central bank, at the g30 dinner, amsterdam, 16 june 2023. * * * inflation has been coming down, with the latest data showing a broad - based decline. but it is still projected to remain too high for too long. in our latest projections, eurosystem staff expect headline inflation to average 5. 4 % in 2023, 3. 0 % in 2024 and 2. 2 % in 2025. staff have also revised up their projections for core inflation, which they now see reaching 5. 1 % in 2023, before it declines to 3. 0 % in 2024 and 2. 3 % in 2025. this revision is due to past upward surprises in inflation and the implications of the robust labour market for the speed of disinflation. specifically, we expect both wages and employment to continue growing strongly over the projection horizon, while output growth will be weaker this year and next. in this context, labour productivity growth will be lower and rising unit labour costs are likely to put upward pressure on inflation. this assessment of price pressures is also confirmed by real - time indicators of underlying inflation. exclusion measures and indicators that capture the persistent effects of energy are showing signs of softening. but the wage - sensitive components of core inflation remain strong and domestic inflation is rising. this configuration suggests that the external drivers of underlying inflation – namely rising energy costs and supply bottlenecks – are easing, but domestic factors – i. e. wage pressures – are becoming increasingly important. at the same time, our monetary policy is working to rein in inflation pressures. we have already undertaken a sizeable policy adjustment, and this is now starting to be felt along the transmission chain. first, we are seeing our past rate increases being transmitted forcefully to financing conditions. borrowing costs have increased steeply and growth in loans is slowing. in april, lending rates reached their highest level in more than a decade, standing at 4. 4 % for business loans and 3. 4 % for mortgages. second, our monetary policy is also starting to be transmitted to the demand components that are typically more sensitive to interest rate changes : housing and business investment, as well as durable consumption goods. this is one reason why we are seeing a pronounced divergence between weakening manufacturing and resilient services. the strengthening transmission of policy tightening to the economy helps explain why inflation is projected to decline