proposal is a promising step in the right direction. by strengthening investment in new and sustainable technologies, the euro area can accelerate its transition towards a digitalised and low - carbon economy. the covid - 19 crisis forcefully demonstrates that digital transformation is not an option, but a must. the medium - term implications of covid - 19 for monetary policy when prospects for the economy and inflation are highly uncertain, central banks essentially have to act as risk managers : they need to take action before the risks materialise to shelter the economy from further and deeper harm. tail risks, in particular, may cause the economy to react in a non - linear and disruptive way. in spite of the receding stress in financial markets, there was therefore unanimous understanding at the june meeting of the ecb ’ s governing council that further strong policy support was needed to prevent medium - term inflation from moving further away from our inflation aim of below, but close to, 2 %. two broad decisions had to be taken. the first was the choice of the appropriate instruments. the second was the calibration of the instruments, taking into account potential side effects. these two decisions are, of course, interrelated. the choice of instruments ultimately hinges on the assessment of which instruments can address the risks to the outlook most effectively. instrument effectiveness, however, is often highly state and time dependant. persistent periods of market stress, for example, may weaken the transmission of changes in our key interest rates. the logic is easy to see : a reduction in short - term risk - free rates typically leads yield - oriented investors to rebalance their portfolios towards riskier assets, either along the yield curve or across asset classes. this channel is even more powerful when rates are negative : it sets strong incentives for investors to move away from short - term assets so as to ensure non - negative income flows ( see slide 4 ). market stress considerably weakens this portfolio rebalancing channel. and although markets have calmed gradually, both in the euro area and in the united states, stress indicators remain at an elevated level compared to the pre - crisis period ( see slide 5 ). in such conditions, two sets of policy measures tend to be most effective : those acting directly on banks ’ funding conditions, and those, such as asset purchases, that alleviate investors ’ balance - sheet constraints. the bank - based measures materially reduce the potentially adverse impact of tightening marketbased funding conditions on lending to firms and households. in the

. founding ideologies aside, countries'economies are more connected by virtue of increased trade of products and services. free markets, technological innovation, and instant communications are the watchwords of the global economy. and the dissemination of financial innovation has gained new converts. london, hong kong, singapore, and shanghai increasingly seek to challenge new york as the center of global financial markets. competitive national ambitions, perhaps, have demanded an embrace of economic liberalism to build wealth even among those regimes that may prefer something closer to autocracy in their non - economic dealings. democratizing credit to enlarge the global middle class, efficiently allocating capital, and dispersing risk exposures – these remain compelling practices for private market participants throughout the world. these financial market tailwinds bolstered worldwide economic growth, which is near record levels. in 2006, the u. s. economy grew 3 percent, while growth outside the united states averaged nearly 4 percent as all major regions racked up solid gains. so far this year ( through the third quarter in the united states and through the second quarter elsewhere ), u. s. output growth managed to continue apace, while growth for the rest of the world picked up to more than 4 percent. clearly the global economy has been firing on all cylinders, with emerging asia taking the lead. there can be little doubt that this macroeconomic performance is due, at least in part, to the increased adoption of liberal economic practices around the globe. perhaps, then, the case for the end of economic history is not without some evidentiary backing and persuasive appeal. evolution of monetary policy and financial stability in a recent survey paper, david laidler identifies three tenets that embody the current consensus on the conduct of monetary policy in advanced economies ( laidler, 2007 ). first, market economies are inherently self - righting ; second, open economies perform best under flexible exchange rates ; and third, central bankers should focus on price stability as their long - run objective. 4 monetary policy in the past couple of decades can, almost assuredly, claim far more successes than failures. look no further than measures of consumer price inflation in the the federal reserve's dual mandate is not inconsistent with laidler's third tenet. advanced economies. median inflation ( as defined by the international monetary fund ) has held near 2 percent for the decade. this performance has helped anchor inflation expectations, which, in turn, has helped damp the pass - through of