suggested and they all differ in many respects. they can be based on different monetary and credit aggregates ; they may vary according to geographical coverage ; and finally, they can be constructed using different types of aggregation. even more challenging is diagnosing at what point global monetary liquidity becomes excessive. for excessive i mean liquidity that poses a medium or long - term threat to price stability or starts to boost asset prices to levels not justified by economic fundamentals. certainly, a normative concept is needed to define excess liquidity. i hope that these two days will help us to make progress in reaching a common understanding on how to assess global liquidity insofar as the concept is established. looking at the current situation, at least it can be asserted that global liquidity has been increasing at a sustained and vigorous pace over the past few years. we are also experiencing high asset prices all across the commodity markets and in some areas both, the housing markets and the stock markets. commodity prices – notably oil and food prices – are also now rising strongly at the global level. in my view, we should be concerned about – and, as central bankers, alert to – the possibility that there may be a spillover into consumer prices. in particular, the wide availability of financial capital at low interest rates across the largest international financial markets has partly contributed to the significant rise in the prices of various assets in the recent years. concerns about the impact of ample liquidity on asset prices – notably the underpricing of risks that has been signalled by the ecb – have been repeatedly voiced. in the context of rapid liquidity expansion, asset prices may overshoot, leading to potentially costly boom bust cycles, the misallocation of resources and pressures on price developments. in this respect, ecb research has also shown that monetary liquidity shocks have played a role in driving asset prices during the boom phase of asset price cycles. however, the issue of empirical causality between asset prices and portfolio allocation, on the one hand, and money and credit developments, on the other, remains a subject of ongoing research. a full understanding of the dynamics and forces behind global monetary liquidity is important for providing insights into the various transmission channels through which liquidity can affect the global business cycle, asset prices and global inflation. in the current context, if global economic growth and global liquidity are likely explanations for the recent increase in commodity prices, the resulting inflationary pressures should not necessarily be dismissed as “ non -

federal reserve system and the ecb, for reassurance. one of the sources of uncertainty for insurers ( and others, too ) is interest rates. in particular, quantitative easing, or qe, which affected the entire yield curve. aren ’ t interest rates gradually eluding market participants ’ expectations, leading them to wonder what sort of market equilibrium will exist at these rates? what constraints could affect the ecb ’ s decision - making? isn ’ t this a strong driver of cycles and uncertainty? market participants can see the benefits of central banks managing the yield curve, because it fosters economic activity and stability. it is true that part of how interest rates are set is eluding market mechanisms. nevertheless, we have to put this discussion into perspective. on the one hand, it ’ s nothing new : by design, monetary policy always has an impact on interest rates. on the other hand, since the start of qe and in all market segments, including sovereign debt as well as corporate debt, the ecb has always taken care not to suppress the price formation mechanism. as an example, this is one of the reasons why the ecb does not purchase more than 33 % of a sovereign issuance. central banks now have a strong influence on the entire yield curve, over a very long horizon. the counterpart to this is to be transparent towards the market and to provide visibility and predictability concerning how we are going to act. that ’ s the purpose of our forward guidance, 1 / 5 bis central bankers'speeches which clarifies our reaction function. forward guidance is not an unconditional commitment about what we are going to do. that ’ s not something we would be able to do and we wouldn ’ t be credible, as we necessarily react to new information flows we receive. it does, however, provide clarity about how our monetary policy incorporates these information flows. if we explain this reaction function to the markets clearly enough, then they can incorporate it into the price formation mechanisms. and we feel that this has worked rather well. the markets find the way we conduct forward guidance useful. today, particularly in the united states, there is a debate about whether forward guidance should be abolished and replaced with completely opportunistic policy that could be fairly arbitrary. this discussion makes sense when monetary policy normalisation is at a more advanced stage. after all, our monetary policy before the crisis did not include forward guidance and that seemed perfectly normal to everyone. once monetary policy