has always characterised our liquidity management. although the frequency of liquidity operations has increased when necessary and the timing and maturity of liquidity provision has evolved over time, such actions aimed at reassuring market participants about the continuation of transactions in the money market and have neither involved substantial changes to the operational framework nor impinged on the monetary policy decisions and the primary objective of price stability. this means that we adhered from the very outset of the turmoil to the clear separation between the determination of the monetary policy stance, on the one hand, and the steering of short - term market interest rates via the operational framework, on the other. this has ensured the “ neutrality ” of liquidity operations : allotment decisions and other operational matters have neither signalled nor been interpreted as offering signals about the future stance of monetary policy. in view of the upside risks to price stability i have mentioned before, it was crucial that liquidity operations were not interpreted by market participants as having a monetary policy content, in particular regarding future changes in the stance. if the liquidity operations had been seen as a signal of the intention to ease the stance of monetary policy, the credibility of the ecb ’ s commitment to its primary objective of price stability could have been put at risk. in turn, this may have triggered the emergence of the inflationary psychology that we are determined to prevent. it is also important to emphasise that our money market operations could not guarantee the re - establishment of normal conditions in the money market – this depended largely on the behaviour of private sector participants themselves, supported by the appropriate regulatory and supervisory authorities. nonetheless, given the crucial role of the money market in the transmission of monetary policy, the ecb felt and acted on its responsibility to provide support for market functioning as the tensions emerged. concluding remarks let me conclude. 1. the creation of the emu has been a great success. the inflation rate in the euro area has been at an unprecedented low level by historical terms in the first 10 years. key to the success of the ecb has been its high level of credibility in safeguarding price stability in the euro area. this credibility is primarily rooted in the institutional setting of the ecb enshrined in the maastricht treaty and the ecb ’ s stabilityoriented monetary policy strategy. 2. the euro area is currently passing through an episode of weak economic activity characterised by high commodity prices weighing on consumer confidence and demand and by dampened investment growth. however, the deterioration

term horizons. over the past years, the underlying strength of monetary and credit expansion in the euro area has created upside risks to price stability that appear to have become manifest as inflation has trended upwards. this confirms ex post the prominent role our strategy assigns to money. after we have gradually increased the ecb key interest rates from the end of 2005, the underlying money and credit developments now show some first signs of moderation. but all available measures for underlying money growth that are assumed to have leading indicator properties for the development in consumer price inflation are still strong and point to upside risks to price stability in the medium to longer term. m3 growth remains vigorous, although it should be kept in mind that the current headline growth rate of m3 tends to overstate the underlying pace of monetary expansion. the flat euro yield curve at present encourages substitution from longer maturity assets outside m3 into monetary instruments, thereby raising m3 growth. in the context of the financial tensions it turned out that the monetary analysis – by trying to identify the policy - relevant signal in money contained in its lower - frequency developments – offers also important insights into the behaviour of the banking sector and how tensions in the money market have influenced the financial system. for instance, as regards bank loans the conclusion emerged that the availability of funding to the euro area non - financial sector had not been significantly impaired as a result of the financial market tensions. this assessment was a valuable input into the policy discussion, in a context where the existence of a “ credit crunch ” was widely perceived to be established. nevertheless, it is of course true that the growth in loans to the non - financial private sector has moderated recently, and indeed is expected to continue to do so. however, this largely reflects the regular impact of developments in economic activity and tighter credit conditions, with no signs so far of an additional effect coming from the financial tensions. thus, the thorough monetary analysis undertaken by the ecb has informed the shorter - term evaluation of the impact of tensions on the financial sector, on financing conditions and credit availability. this is not to deny, of course, that the prominent role of our monetary analysis is instrumental to maintain our focus on the medium - term horizon, when the effect of monetary policy on our primary objective – price stability – will materialise in full. in the current turmoil the focus on the underlying monetary trend has been of great help to look through the impact of many temporary shocks that affect the economy and to act in a consistent manner over time, thereby supporting the