has depreciated since may by 2. 5 % to 1. 354. if taken as new conditioning assumptions, these developments would move the whole path of the inflation projections upwards and ensure a faster return to price stability. the second channel through which the recent ecb decisions will be consequential is the credit channel, which is expected to be positively impacted by the new targeted ltro facility and the extension of the acc programme. 7 the third channel has to do with expectations. the announcement of the measures adopted at the beginning of june has been accompanied by a clear communication concerning the future path of policy. in his press conference, president draghi emphasised again that “ key ecb interest rates will remain at present levels for an extended period of time in view of the current outlook for the additional credit claims ( acc ) programme is an extension of our collateral policy to accept directly loans to non - financial firms as eligible collateral for banks to borrow from the ecb. bis central bankers ’ speeches inflation ”. he also added that “ if required, we will act swiftly with further monetary policy easing. the governing council is unanimous in its commitment to using also unconventional instruments within its mandate should it become necessary to further address risks of too prolonged a period of low inflation. ” with this statement, the ecb has left no doubts about its resolve to avoid any downward turn in the euro area inflation developments, because such developments would be extremely harmful. with interest rates at their effective lower bound and persistently timid growth prospects, lower than expected inflation rates would increase the real value of debt, slowing down the deleveraging process of borrowers, both public and private. if a low inflation outlook became entrenched in the expectations of firms and households, the real interest rate would rise, leading consumers and investors to postpone their expenditure plans. a vicious circle of lower demand and lower prices could ensue. how would the ecb react, should the risks of a protracted period of low inflation materialise? but what exactly could the ecb do in the face of a protracted period of low inflation and economic stagnation? as i have already mentioned, the ecb stands ready to deploy additional unconventional instruments, should the likelihood of this scenario increase. the policy response would involve a broad - based asset - purchase programme. the experience of other countries with such programmes testifies that they can be effectively designed. as previously mentioned, various empirical studies suggest that the large purchases carried out in

##es or abss ), it triggers portfolio adjustments on other assets, like equities or exchange rates, and is accompanied by wealth effects. while the theoretical debate on the exact channels of transmission remains active, many event and time - series studies have tried to measure the qe effects. john williams ( 2013 ) presents a survey of several studies and reports that usd 600 billion of fed asset purchases achieves a result equivalent to a cut in the federal funds rate of 0. 75 to 1 percentage point. 1 for a survey of results, see john williams ( 2013 ), president of the san francisco fed, “ lessons from the financial crisis for unconventional monetary policy ” nber conference, october. see also krishnamurthy, a. and a. vissing - jorgensen ( 2013 ), “ the ins and outs of lsaps, ” presented at the federal reserve bank of kansas city ’ s jackson hole symposium on the global dimensions of unconventional monetary policy ; imf policy paper on “ global impact and challenges of unconventional monetary policies ”, october ; neely, c. ( 2013 ), “ unconventional monetary policy had large international effects ”, federal reserve bank of st. louis working paper 2010 – 018e, updated august 2013 ; joyce, m., m. tong and r. woods ( 2011 ), “ the united kingdom ’ s quantitative easing policy : design, operation and impact ”, bank of england quarterly bulletin q3. bis central bankers ’ speeches the concerns expressed by various economists and the media that the extraordinary increases in the monetary base in many countries would lead to significant inflation rates, never materialised. as the following slide illustrates, there was no transmission in the prevailing economic situation by the banks, to credit or broad money aggregates. inflation did not respond, putting in doubt the quantitative vision about its origin. when asked about what japan should do to overcome deflation, milton friedman answered in 2000 : “ it is very simple. they can buy long - term government securities and they can keep buying them and providing high - powered money until the high - powered money starts getting the economy into an expansion ”. 2 the more recent japanese experience is still open to analysis but the channels envisioned by milton friedman have seemingly not been operating in the other advanced economies. as mentioned, the transmission channels at play in the recent qe experiences are indeed different from the traditional quantitative view. chart 2 the ecb monetary policy in the european crisis. as the financial crisis led to the great recession