. funding conditions for banks have generally improved, and there has been increased issuance activity and a re - opening of some segments of funding markets. at the same time, the demand for credit remains weak in the light of still subdued economic activity and the ongoing process of balance sheet adjustment in non - financial sectors. beyond these short - term effects on market conditions, a key aspect in the design of the three - year ltro is its consistency with the ecb ’ s capacity to ensure price stability in the medium term. most importantly, the interest rate on the three - year operations is indexed to the ecb ’ s main policy rate, i. e. the rate on the main refinancing operations. thus, if ecb were to increase this rate, the costs for the remaining period of the three - year ltros would also rise. hence, the three - year liquidity allocation does not stand in the way of an increase in short - term interest rates ; rather, it would allow such an increase to be immediately translated into the outstanding liquidity operations. as in the past, the governing council will be vigilant in order to contain upside risks to price stability. in this context, let me point out that what is relevant for measuring monetary liquidity is not the balance sheet of the eurosystem, but the balance sheet of the euro area banking sector. only the latter shows the interaction with the real economy. this interaction is captured by monetary and credit data which, despite the recent stabilisation i mentioned earlier, are still very subdued. if these conditions were to change in a way that entailed upside risks to price stability, the governing council would use all the instruments at its disposal to continue delivering on its primary mandate. the ecb ’ s monetary analysis pillar serves to assess signals coming from developments in money and credit conditions. i would also like to mention that our monetary analysis is not narrowly confined to the analysis of headline money and credit dynamics, but also tries to understand their determinants. let me summarise. the ecb has taken an active role in mitigating the financial and economic crisis in the euro area, which has been fully consistent with its mandate. reductions in the main policy rates have served to counteract acute downside risks to price stability. non - standard measures have addressed impairments to monetary transmission channels, thereby complementing changes in policy rates when highly dysfunctional and perturbed market conditions impeded their effectiveness. to preserve

##vre in the future. this involves a continued anchoring of inflation expectations around the midpoint of our target range in the coming years and ensuring that financial markets are functional. at present, achieving our goals appears consistent with a relatively low level of interest rates, in the next year or two, compared with the average of earlier cycles. but we must remain vigilant and watch for potential changes in drivers of equilibrium interest rates in the future. see barclays research, op. cit. the international monetary fund is projecting a rise in south africa ’ s gross government debt / gdp ratio from 62. 2 % in 2019 to 85. 6 % in 2021, the largest among major emerging economies. see fiscal monitor, international monetary fund, april 2020.