prices. net of these items, core inflation remains very low, below 1 per cent. it is forecast to return only gradually to values consistent with price stability, as economic slack is progressively absorbed. for this reason it is of the utmost importance, for the euro area as a whole, that we maintain the very favourable financing conditions needed to secure a durable, self - sustained and broadlybased convergence of inflation rates towards our price stability objective. the asset purchase programme, which is set to continue at least until the end of next december, the low level of our policy rates, and the forward guidance constitute a package of mutually consistent elements. a reassessment of this package is not warranted at this stage. before altering any component of our stance, we need to be confident that a convincing and self - sustained improvement in inflation and economic activity is taking place. to date, we have not seen any sign that this accommodative stance of monetary policy is causing generalised imbalances in the area. the impact of monetary policy measures on bank 1 / 4 bis central bankers'speeches profitability has in general been contained. should any threat to financial stability materialise, macro - prudential measures should be used to limit the build - up of systemic risks and to smooth the financial cycle in particular sectors or geographical areas. while monetary policy has been successful in warding off a deflation trap and no negative side effects have emerged so far, when it comes to achieving a durable recovery monetary policy cannot be left to itself. aggregate demand must be supported by fiscal policy, whenever and wherever possible. at the same time, potential growth must be reinforced by adopting appropriate reforms to foster technological progress and strengthen human capital. the very magnitude and diffuse nature of the challenges and changes we face – new technologies, global trade, demography, migration – demand a truly common strategy that goes beyond emergency response. it is a fallacy that we can direct the course of the economy and finance, patently global phenomena, from within the limited confines of individual european countries, but a common strategy is lacking. as the crisis unfolded in recent years, measures to deal with the emergency were progressively flanked by reform of the governance of the european union and especially of the euro area. these reforms, which began with intervention on public finance rules and macroeconomic surveillance, have marked further steps in economic integration : the european stability mechanism and the banking union are the most prominent examples. however, we seem to have lost momentum along

reading of classical texts on economic liberalism, was no secret to anyone inside the bank of italy. to understand the central bank ’ s modus operandi in those years we must consider the powerful influence exerted by the predominant economic culture. it was not a market culture. its influence, combined with vested interests, often directed economic policy towards solutions that did not follow the market. in italy, keynesianism only acquired a foothold in academia towards the middle of the 1960s and the version that gained credence among policy - makers had a distinctly more dirigiste flavour than that prevailing internationally : not only did economic policies to support demand earn plaudits from politicians and economists, but more generally, above and beyond the actual keynesian propositions, they saw broad government intervention in economic activity, especially investment, as the means of perpetuating the growth of the 1950s. development, industrialization and social and distributive conflict were the issues that attracted the best minds and the vision of political leaders. what was asked of monetary policy was to produce growth, capital formation, the narrowing of the gap between italy and its european partners, and balance - of - payments equilibrium. price stability was a secondary concern. the autonomy of the central bank was not viewed as essential to stability. in italy, interest focused on the real economy ; the role of money, the causes and effects of inflation were not common subjects of inquiry. baffi ’ s studies on money thus constitute a notable exception. the discussions that franco modigliani had in 1967 with the top management of the bank of italy during the development of the econometric model exemplify the difficulty of describing the problems of monetary policy at that time using today ’ s language and criteria. in those meetings governor carli defined the bank ’ s main objective as that of fostering a sufficient level of income to allow investment that would close the distance between italy and the other members of the european economic community. 4 the governor mentioned price stability only as a subordinate aim, and it was interpreted, moreover, solely as alignment with the level of international prices, that is to say an objective for the defence of competitiveness. the pre - eminence of the objective of price stability did not have formal sanction ; it was not shared by public opinion, nor was it comprehended in academic and political circles. monetary management was increasingly entrusted to administrative controls on credit, namely the ceiling on the growth in bank lending ( introduced in 1973 ) and