hypothesis ”, journal of money, credit and banking, vol. 35, no 6, pp. 1119 – 1197. bis central bankers ’ speeches monetary conditions – although this trust often was not shared outside the academic literature. incidentally, i note that the idea that what matters for the transmission mechanism is the whole array of interest rates and asset prices as well as balance sheets, and not just any specific short - term interest rate has been a crucial theme in monetarist thinking. and monetarists argued that monetary aggregates provide a handy summary indicator of the changes in the various yields and asset prices. 2 from the beginning of the financial crisis, the first element of the transmission mechanism – the money market – ceased to function properly. liquidity premia soared and arbitrage transactions became thin. with the collapse of lehman brothers, financial tensions affected almost all asset classes, leading to a pronounced liquidity preference shock. as a result of the ensuing self - sustained deleveraging process, interest rates and asset prices can lose contact with or change their relationship to the central bank policy instruments. in such circumstances, a central bank needs to regain control of the transmission mechanism, meaning that it must steer financial and monetary conditions in a way that is consistent with its price stability mandate. the ecb responded to these challenges by cutting its policy rate – the main refinancing operation ( mro ) rate – and by switching to a fixed - rate full allotment regime. under such a regime, the central bank stands ready to satisfy fully the demand for liquidity – against collateral – at the prevailing policy rate. in the absence of a functioning interbank market, that demand for liquidity is in excess of the banks ’ liquidity needs under normal conditions. note that this regime can be maintained at any policy rate level, due to the presence of a corridor in the ecb ’ s operational framework. it simply implies that excess liquidity pushes the overnight rate down towards the rate paid on the deposit facility. it also implies that the corridor can provide for a way to detach the decision to provide liquidity from the decision to set the interest rate. let me illustrate this point with an example. if market interest rates and bank lending rates move in a manner inconsistent with a change in the policy rate, the central bank ’ s ability to influence the real economy and inflation may be impaired. the central bank can try to correct this. traditional wisdom is based on making an even larger change

, which foresee annual inflation at 0. 3 % in 2020, 1. 0 % in 2021 and 1. 3 % in 2022. compared with the june 2020 eurosystem staff macroeconomic projections, the outlook for inflation is unchanged for 2020, has been revised up for 2021, and is unchanged for 2022. the unchanged projection for inflation in 2022 masks an upward revision to inflation 2 / 3 bis central bankers'speeches excluding energy and food – in part reflecting the positive impact of the monetary and fiscal policy measures – which was largely offset by the revised path of energy prices. turning to the monetary analysis, broad money ( m3 ) growth continued to rise, reaching 10. 2 % in july 2020, after 9. 2 % in june. strong money growth reflects domestic credit creation and the ongoing asset purchases by the eurosystem, as well as precautionary considerations which foster a heightened preference for liquidity in the money - holding sector. in this environment, the narrow monetary aggregate m1, encompassing the most liquid forms of money, continues to be the main contributor to broad money growth. developments in loans to the private sector continued to be shaped by the impact of the coronavirus on economic activity. following strong increases in the early months of the pandemic, the annual growth rate of loans to non - financial corporations remained broadly stable in july, standing at 7. 0 %, compared with 7. 1 % in june. high rates of corporate loan growth continue to mirror elevated liquidity needs of firms to finance their ongoing expenditures and working capital and to further build liquidity buffers, although the rebound in economic activity has resulted in some recovery in their revenues. the annual growth rate of loans to households also remained stable at 3. 0 % in july – the same rate as observed since april 2020. growth in loans to the private sector continues to benefit from historically low bank lending rates. overall, our policy measures, together with the measures adopted by national governments and european institutions, will continue to support access to financing, including for those most affected by the ramifications of the pandemic. to sum up, a cross - check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed that an ample degree of monetary accommodation is necessary for the robust convergence of inflation to levels that are below, but close to, 2 % over the medium term. regarding fiscal policies, an ambitious and coordinated fiscal stance remains critical, in view of the sharp contraction in the