of monetary policy to those areas. for example, a prolonged downturn with higher unemployment will tend to create higher loanlosses for banks, which impairs the bank lending channel of transmission as banks are forced to rebuild their capital. such an economic slump is also likely to worsen the fiscal position for the government, which can further exacerbate fragmentation via the bank - sovereign nexus. moreover, even if transmission works smoothly on the supply side, structural reforms also affect the demand side : the willingness of entrepreneurs to take on credit for new investment. insofar as structural factors create an unattractive investment environment, they can impede credit demand and thereby hamper the effectiveness of monetary policy. by the same token, structural reforms and accommodative monetary policy can be complementary in boosting investment. that would include, at the micro level, opening up protected sectors where there is pent - up investment demand or reducing administrative burdens on entrepreneurship ; and at the macro level, lifting expectations of future growth and hence “ animal spirits ”, especially where firms are constrained by a debt overhang. this psychological dimension of reforms is particularly important for the euro area given that 5 years ahead growth expectations among forecasters have been falling continuously since 2001, from around 2. 7 % then to 1. 4 % today. bis central bankers ’ speeches third, if due to structural factors shocks leave deep scars on some economies, it can affect the long - term cohesion of the union. divergence in structural unemployment is more likely to become entrenched across the union, which of course cannot be offset, like in other federations, by fiscal transfers between the constituent members. and to the extent that this weakens the political rationale for monetary union – that all members are better off over time inside the union than they would be outside – it also weakens its long - term cohesion. this undermines the integrity of the currency union. the ecb ’ s interest in structural reforms therefore has two dimensions : achieving an efficient implementation of monetary policy in the short - term, and maintaining the integrity of the currency over the longer - term. both of these feed into euro area price stability. however, our interest is not in how countries implement reforms. this is a national question and there are different models that can work in a monetary union. our interest is in whether they succeed in doing so, as it is this that has implications for the whole euro area. it is in this context

2015, the euro area was experiencing negative headline inflation rates. crucially, there were also material signs that inflation expectations were becoming unanchored, which increased the likelihood that inflation would stay below our objective even when the oil price effect faded. these data, especially measures of inflation expectations, were sufficiently decisive to warrant our shift to large - scale asset purchases in january this year. the prevailing macroeconomic outlook meant that the benefits of deploying that instrument in terms of delivering our mandate now clearly outweighed the costs in terms of potential side effects. but by waiting for adequate evidence, had we ended up “ behind the curve ” in counteracting the disinflationary trend? in my view the answer is clearly no. first, we had taken a series of expansionary measures throughout 2014 in response to the incoming data, including cutting our main refinancing rate to its effective lower bound ; introducing a negative rate on our deposit facility ; launching our targeted long - term refinancing operations ( tltros ) ; and, importantly, in september 2014, with our decision to begin purchases of abs and covered bonds. second, by communicating clearly the conditions under which we would use large - scale asset purchases – our so - called reaction function – we had already initiated a gradual easing of financial conditions as markets anticipated our measures. long - term nominal interest rates fell by around 100 bps from mid - 2014 to january 2015. because we were predictable and credible, our policy was taking effect before it was actually announced in january. third, even though our measures were partly priced - in, when they were launched the initial impact was stronger than many expected and the response of macroeconomic indicators was quicker. we have seen strong signalling effects, reflected in rising inflation expectations, a rebound in consumer and business confidence and higher equity prices. and we have also seen evidence of significant portfolio rebalancing effects, both across assets classes ( i. e. towards more risky assets ) and across jurisdictions, producing a fall in the effective exchange rate. as a result, the economic recovery has broadened and the june ecb staff projections now envisage inflation to average at 0. 3 % in 2015, 1. 5 % in 2016 and 1. 8 % in 2017. our actions have proven timely and provide us, so far, with comfort that the medium - term inflation outlook is secure. both output and inflation forecasts are broadly balanced. bis central bankers ’ speeches these forecasts are however contingent