to mounting downside risks to the growth outlook of the euro area and the global economy, ultimately threatening price stability. these downside risks were also related to an intensification of financial market tensions. additional 25 basis points were cut in december, since intensified financial market tensions continued to dampen economic activity in the euro area. since then, the rate on the main refinancing operations has been at the historically low 1 %. from the onset of the crisis, the ecb has also embarked in a series of non - standard measures – as they are usually labelled – aimed at preserving the proper transmission of monetary policy. bis central bankers ’ speeches among the measures announced in december, i recall that the governing council decided upon two very long - term refinancing operations with a maturity of three years, the first of which was already conducted last december. this duration is an innovation in ecb monetary policy operations. it serves to give banks a longer horizon in their liquidity planning. it also helps banks to a balanced and orderly deleveraging over the medium term, thereby avoiding “ fire - sales ” of their assets and avoiding a downscaling of longer - term lending. a second measure was to expand the set of available collateral. this allows banks to use certain types of loans as collateral, which was unavailable for banks before. the broadening of collateral standards will ensure that the liquidity provided under the three - year ltro operations will reach not only the large banks but also small and medium - sized institutes. these tend to finance the small and medium - sized enterprises, which are the backbone of the euro area economy. the third measure was to reduce the required reserves ratio from 2 % to 1 %. this measure releases liquidity of the banking sector of about 100 billion euro. in combination with other measures, the reduction in the reserve requirements should likewise help revive money market activity and support lending. again, the goal of all these measures is to maintain the appropriate credit supply to households and firms, to ultimately guarantee price stability in line with our mandate. at our recent meeting in february, the governing council decided to keep key interest rates unchanged. according to our assessment, inflation is likely to stay above 2 % for several months to come, before declining to below 2 %. regarding economic activity, available survey indicators confirm some tentative signs of a stabilisation at a low level around the turn of the year, but the economic outlook remains subject to high uncertainty and downside risks. for the

benoit cœure : the perils of isolation speech by mr benoit cœure, member of the executive board of the european central bank, at the council on foreign relations, new york city, 19 april 2017. * * * i would like to thank j. beirne, m. ca ’ zorzi and m. grill for their contributions to this speech. i remain solely responsible for the opinions contained herein. we are currently seeing widespread concerns in many parts of the world regarding free trade and globalised finance. these concerns mainly stem from perceptions of inequality of opportunities and a lack of inclusiveness in sharing the benefits of international openness, resulting in growing disparities in income. often, these are not only perceptions. in this country, for example, net income inequality has been on an upward trend since the late 1970s. 1 although globalisation might have amplified growing income inequality, empirical analysis tends to suggest that technological progress, and the associated rise in demand for skilled labour over low - skilled, is likely to explain most of the rise in income inequality in advanced economies since the early 1980s. 2 and yet, fears of globalisation appear to dominate public discussion and are likely to have been a key factor in fomenting political opposition to the free movement of goods, services, capital, and people. much has been said about the perils of rising protectionism. today, i would like to focus on a related but distinct risk, namely all the talk of a weakening of the international financial regulatory agreements that were reinforced in the wake of the financial crisis. such a push - back would be all the more difficult to understand as there is compelling empirical evidence that excessive risk taking by the financial sector has contributed to rising inequality. 3 dismantling regulatory standards would therefore not only make financial markets less safe, it would also be unfair to those who feel left behind. indeed, in recent years, through the actions of the financial stability board ( fsb ) and standardsetting committees such as the basel committee on banking supervision, the international community has made important progress in rewriting the international financial rule book with a view to curbing financial exuberance, protecting taxpayers from costly bailouts, and improving cross - border cooperation. 4 these reforms have undoubtedly made global financial markets more resilient. and they have also supported the recovery of loan growth to households and firms despite claims that regulation may hurt economic growth and dent bank profitability. indeed, researchers at the bank for international settlements have