public. in fact, in all countries, the changeover period was much swifter that anticipated. sharing a single currency implies a need of a feeling of community and trust among all the users of the currency. after all, a currency is backed by the mutual trust placed in it by its users. the relative ease with which euro cash was introduced and accepted by people shows that there may be stronger feelings of community in europe than many would have thought. third, another important, but sometimes grossly underestimated success of the euro relates to the convergence of long - term market interest rates towards the best performers in terms of credibility and low interest rates. the stability oriented macroeconomic policy framework, focusing on price stability and sound fiscal policies, has resulted in significantly reduced financing costs in most countries. today, the european economy benefits from benchmark long - term market interest rates well below 4 %, a level which most issuers have never seen in the last fifty years. the reduction in risk premia and the stabilisation in inflation expectations at low levels is a major achievement which must be maintained by today ’ s and future economic policy making. fourth, a related success of the euro has been an improved resilience against crises in financial markets. for those who experienced the many episodes of exchange and interest rate volatility between the 1970s and the mid - 1990s, it is clear that, without the single currency, events in recent years such as the financial crisis of autumn 1998, the turbulence that followed the september 11 terrorist attacks or the past swings in global exchange markets would have triggered major turbulences in european countries. last but not least, i would like to mention the single monetary policy, which has preserved price stability and credibility in a transparent manner. with a clearly defined mandate to pursue price stability in the treaty and a strong focus on independence, the european central bank, together with the participating national central banks, has implemented the single monetary policy in the euro area since 1999. as you know, the ecb defines price stability as inflation rates below, but close to, 2 % over the medium term. looking back at the period since the introduction of the euro, actual inflation rates were not always in line with price stability, due to exceptional shocks such as the rise in oil prices in recent years. however, these shocks did not undermine the credibility of our promise to ensure price stability over the medium term and therefore did not derail inflation expectations. this was due to our medium - term orientation of monetary

in lending was not completely due to lower loan demand, then this credit contraction exacerbated the decline in real activity – creating what is called an adverse feedback loop between the financial and real sectors of the economy. the federal open market committee ( fomc ) reacted aggressively in response to the recession and financial crisis. the fomc quickly lowered its policy rate – called the federal funds rate – to essentially zero ( chart 12 ). the aggressive pace for lowering the fed funds rate reflected lessons learned from japan ’ s earlier experience dealing with a housing market boom and bust. at the same time, the fomc increased its provision of liquidity to the financial system. initially, liquidity was added through the traditional discount window, and later through a wide range of new liquidity facilities that were developed. up until the lehman bankruptcy, the fomc provided this liquidity without expanding the size of its balance sheet ( chart 13 ). as the crisis intensified following the lehman bankruptcy, the fomc significantly escalated its support for the economy. the fomc could not provide additional support to the economy in the traditional manner by reducing the fed funds rate since the policy rate was already at zero. instead, the fomc initiated the large - scale asset purchase ( lsap ) program. the objective was to ease financial market conditions to provide more support to the economy. central bank purchases of assets raise the price and therefore lower the yield on these assets. these purchases crowd out some investors who shift their purchases to other assets, which lowers the yields on these assets, as well. in this way, financial market conditions are eased more generally. a consequence of the lsap program was a rapid expansion of the central bank ’ s balance sheet. the combined monetary and fiscal support for the economy helped to arrest the decline in economic activity. as final sales began to stabilize, firms were able to manage down their inventories. the aggregate inventory - to - sales ratio rapidly declined to its pre - recession level ( chart 14 ). with their excess inventory worked off, firms needed to meet demand by increasing production. aggregate industrial production rebounded – especially for durable goods ( chart 15 ). growth was also improving abroad, which increased the demand for our exports ( chart 16 ). in this chart, each business cycle is contrasted with real exports normalized to a value of one at the business cycle peak, which is dated as time zero on the chart. the chart shows the relative path of real