net asset purchases will gradually cease to provide sufficient guidance about the likely evolution of the monetary policy stance. so, our forward guidance on the path of our policy rates will have to be further specified and calibrated as appropriate for inflation to remain on the sustained adjustment path towards levels below, but close to, 2 % over the medium term. 11 / 13 bis central bankers'speeches 1 i would like to thank danielle kedan for her support in preparing this speech. 2 praet, p. ( 2017 ), “ calibrating unconventional monetary policy ”, speech at the ecb and its watchers xviii conference, frankfurt am main, 6 april. 3 for a summary of the literature on the effectiveness of non - standard measures, see ecb ( 2017 ), “ impact of the ecb ’ s non - standard measures on financing conditions : taking stock of recent evidence ”, economic bulletin, issue 2. 4 see also praet, p. ( 2017 ), “ the ecb ’ s monetary policy : past and present ”, speech at the febelfin connect event, brussels / londerzeel, 16 march. 5 the impact of credit easing is estimated on the basis of an event - study methodology which focuses on the announcement effects of the june - september 2014 package ; see the ecb economic bulletin article entitled “ the transmission of the ecb ’ s recent non - standard monetary policy measures ” ( issue 7 / 2015 ). the impact of the deposit facility rate ( dfr ) cut rests on the announcement effects of the september 2014 dfr cut, while the impact of the subsequent dfr cuts is difficult to disentangle from the simultaneous app adjustments. therefore, both effects are shown jointly. app encompasses the effects of the asset purchase measures adopted at the january and december 2015 governing council meetings, the march and december 2016 meetings and the october 2017 meeting. the january 2015 app impact is estimated on the basis of two eventstudy exercises by considering a broad set of events that, starting from september 2014, have affected market expectations about the programme ; see altavilla, c. carboni, g. and motto, r. ( 2015 ) “ asset purchase programmes and financial markets : lessons from the euro area ”, ecb working paper no 1864, and de santis, r. ( 2016 ), “ impact of the asset purchase programme on euro area government bond yields using market news ”, ecb working paper no 1939. the quantification

s., that, if – due to the bursting of an asset price bubble – financial instability were to threaten to derail economic growth, u. s. monetary policy would have been able to effectively react by means of interest rates cuts, as occurred for example in the u. s. following the 1987 stock market crash and the bursting of the “ dotcom bubble ” of the second half of the 1990s. this was the so - called “ mopping up ” approach to dealing with asset price bubbles, which i will discuss in more detail later on. of course, there had been a few dissenting voices questioning the dominant optimistic view. borio and white, in particular, building upon kindleberger ’ s classic historical analysis of bubbles and panics, 3 had suggested that periods of inflation and output growth stability may sow the seeds of future instability, by engendering in the general public the erroneous notion that a new and much more stable era had been entered, in which the old rules did not apply any longer. in this respect, it is interesting to notice that the great moderation period had been characterized not only by large decreases in macroeconomic volatility for both inflation and output growth, but also by a dramatic compression of risk premia across several asset classes, which is compatible with the notion that economic agents were indeed regarding the volatility decreases as part of a “ new norm ” characterized by permanently more stable macroeconomic dynamics. with the benefit of hindsight – and of the decisive “ test ” of the respective validity of the different viewpoints provided by the crisis – it is today easy to appreciate the soundness of borio and white ’ s position. the great moderation years had been characterized, compared with the previous portion of the post - wwii era, by a significantly more frequent occurrence of asset price bubbles and subsequent crashes. a longer - term perspective focusing on the last two centuries even shows that the occurrence of asset price booms and busts under conditions of price stability, far from being a “ fluke ” of the great moderation era, have in fact been historically quite common. until the outbreak of world war i, indeed, monetary regimes based on commodity money, such as gold and silver, which had dominated for centuries, guaranteed an extent of price stability which is, by today ’ s standards, virtually unimaginable. in spite of such remarkable price stability, however, those standards had been recurrently plagued by financial crises and asset