a sensitive issue. according to their brexit white paper published last week, the uk government will strive for an ambitious free trade agreement with the eu as a long - term solution. but financial services are an especially tricky area. so far, the eu has never fully integrated finance in its free trade agreements with third countries. 2. 2 location decisions consequently, many banks are now considering moving some of their business to the eu. you can read reports about major firms taking new decisions daily – some are true, some are rumours. first, let me say that i expect london to remain an important financial centre. nevertheless, i also expect many uk - based market participants to move at least some business units to the eu in order to hedge against all possible outcomes of the negotiations. the question that is causing some excitement is : where will banks go? as a supervisor, my main concern is that banks are supervised according to standards that are both high and consistent. this is best ensured within the ssm area, which means i will not promote any particular financial centre. that said, i am open for dialogue with financial institutions in assessing the conditions for moving business units to germany. financial institutions are right to contact their potential future supervisors early on. and numerous market participants have already contacted the ecb, bafin and the bundesbank. we respond to such requests pragmatically. that is, we provide financial institutions with quick and reliable guidance and clarity on the requirements for establishing a licensed entity here in germany and aid a smooth transition. one important issue in this regard are the rules related to outsourcing. here, we explain that german law requires any subsidiary domiciled in this country to retain chief responsibility for its business. this means that we will not accept any empty shells or “ letterbox companies ". 2 / 4 bis central bankers'speeches 2. 3 future of clearing market access and location decisions are the primary point of interest. a close second is the future of clearing in the uk. will uk - based clearing houses be stripped of their ability to clear euro - denominated transactions? at present, the eurosystem does not have regulatory competence to restrict clearing in the uk. however, continuation of clearing strongly depends on the acceptance of the european court of justice, as mario draghi emphasised yesterday. and so far, the uk government has indicated that it would leave the european court of justice after brexit. furthermore, the eu has introduced clearing obligations for some interest rate

therefore pay particularly close attention to longer - term inflation expectations. this is because they are an indicator of confidence that the self - imposed monetary policy goal of an inflation rate below, but close to, 2 % over the medium term will be achieved. bis central bankers ’ speeches moreover, we must also carefully monitor possible signs of second - round effects. some believe that the current wage growth rates in the euro area are already sounding warning bells. i don ’ t agree, however. as some crisis countries will still need to increase their price competitiveness in order to regain lost global market shares, wages there can only rise moderately. this employment - oriented wage policy is thus putting pressure on wage growth. yet, on the other hand, the improving labour market situation is boosting consumption. when assessing price risks, we shouldn ’ t be like a rabbit caught in the headlights, fixated on the current consumer price inflation rate. this rate could, in fact, temporarily slip back into negative territory during the spring quarter. monetary policy should look beyond these shortterm oil - price - induced fluctuations in consumer prices. domestic price pressures are better reflected by the core inflation rate, which factors out such effects. although, at 1 %, this rate is currently also below the price stability target, it is rising and is far removed from the dangerous territory of deflation, that is to say the territory in which we would have to fear a downward spiral of sinking prices, falling wages and an economic downswing. 3. paths leading to stronger growth ladies and gentlemen, the purpose of the eurosystem ’ s highly accommodative monetary policy is to stimulate economic activity in order to bringing inflation into alignment with the definition of price stability. private consumption in the euro area has been picking up perceptibly, and not just because financing conditions are favourable – low oil prices and inflation are another factor. investment, meanwhile, is only now gradually getting off the ground. investment, of course, is more than just a component of aggregate demand in the economic process – it also has a bearing on the size and quality of the economy ’ s capital stock. investment in machinery and equipment, especially, keeps production structures up to speed with technological advances, making it a useful lever for lifting an economy ’ s output and ultimately its growth as well. investment in machinery and equipment may have been back on the increase since early 2013, but across much of the euro area it has still not yet returned to pre - crisis levels.