positive expectations may not immediately translate into higher loan growth. that is a process that takes time to materialise, not only owing to operational considerations but also because the reaction of loan demand to improved supply conditions involves lags. it is therefore probable that the first stage of rebalancing will affect mainly the liability side of banks ’ balance sheets – i. e. funding substitution – before banks move on to the deployment of asset expansion strategies to offload the reserves received. summing up, there is substantial evidence that our monetary policy measures are having the effects intended. but in a context of increasing downside risks to the inflation outlook, especially driven by continued declines in oil prices and a large output gap, and downside risks to the global economy and a still fragile domestic recovery, the governing council decided that the calibration of those measures needed to be adjusted. at its december 2015 meeting, the governing council therefore decided to lower the interest rate on the deposit facility by 10 basis points to – 0. 30 % and to extend the intentional enddate for app by 6 months to march 2017, although subject to an on - going verification of the prospects for inflation to normalise within a meaningful horizon. the monthly purchases of €60 billion under the app are now intended to run until the end of march 2017, or beyond, if necessary, and in any case until the governing council sees a sustained adjustment in the path of inflation consistent with its aim of achieving inflation rates below, but close to, 2 % over the medium term. importantly, the governing council also decided to reinvest the principal payments on the securities purchased under the app as they mature, for as long as necessary. this recalibration will have a sizeable impact on the ecb balance sheet and on excess liquidity. overall, the extension of the asset purchases to at least march 2017 and the decision to re - invest the principal payments on maturing securities for as long as necessary will inject an additional eur 680 billion – about 6. 5 % of the euro area gdp – in liquidity to the system by 2019. this will strengthen our forward guidance on interest rates, ensure accommodative financial conditions and further strengthen the substantial easing impact of the measures we have taken since june 2014. bis central bankers ’ speeches

, d. ( 2018 ), “ towards more resilient economies : the role of well - functioning economic structures ”, journal of policy modeling, vol. 40, no 1, pp. 97 - 117 ). productivity growth has also generally been lower in the euro area than in the united states for some time ( see chart 7 in masuch, k. et al. ( eds. ) ( 2018 ), “ structural policies in the euro area ”, occasional paper series, no 210, ecb, june ). these factors may limit the euro area ’ s relative capacity to bounce back from a recession. 22. esrb ( 2022 ), “ warning of the european systemic risk board ”, 22 september. 23. work stream on non - bank financial intermediation ( 2021 ), “ non - bank financial intermediation in the euro area : implications for monetary policy transmission and key vulnerabilities ”, occasional paper series, no 270, ecb, september ( revised december 2021 ) ; financial stability board ( 2021 ), “ global monitoring report on non - bank financial intermediation 2021 ”, december ; european systemic risk board ( 2022 ), “ eu non - bank financial intermediation risk monitor 2022 ”, july. 24. these financial spillovers work partly through the exchange rate. in particular, monetary policy tightening in the united states is seen as exporting inflation through the exchange rate and driving further tightening elsewhere. it is notable that this market reaction reflects the expectation that central banks are reacting to the short - term effects of exchange rates on inflation, since the empirical evidence suggests that these short - term effects are outweighed over time by the disinflationary spillovers of the federal reserve ’ s tightening. 25. ecb staff analysis, based on a sensitivity exercise of longer - term market - based measures of inflation compensation to larger versus smaller monetary policy shocks, suggests that, unlike in the united states, in the euro area larger monetary policy surprises do not significantly lower five - year forward five - year ahead inflation - linked swap ( ils ) rates compared with smaller policy surprises. 26. several episodes in the recent past – such as the “ taper tantrum ” of 2013, the developments in the us repo market in 2019 and the recent turmoil triggered in the uk bond market by liability - driven investors – have emphasised the importance of managing risks to market functioning. 27. as olivier blanchard recently observed in a twee