innovation fosters faster dissemination of information and its more rapid incorporation into financial market prices. this is of course particularly true for monetary policy decisions and can therefore increase the effectiveness of monetary policy via the interest rate channel. second, financial innovation contributes to an increased holding of financial assets by lowering transaction costs and facilitating arbitrage, hedging, funding and investment strategies. third, financial innovation often relies on greater leverage, increasing the effect of interest rate moves by the central bank. however, in times of combination of financial stress and adverse supply shocks, such as we are now facing, the risk of destabilising highly - leveraged financial institutions of potential systemic importance could complicate the task of the monetary policymaker wishing to raise the policy rate in a timely manner so as to prevent inflationary risks from materialising. besides, when conditions are less benign than usual, the transmission process along the interest rate curve may become non - linear : a striking feature of this summer ’ s events was the surge in short - term money market spreads in the euro area as well as in the united states and the united kingdom. wider and variable spreads between term funding rates, of which many bank loans are priced off, and policy rates are worrying in as much as they may reduce the efficiency of interest rate moves when needed. that said, as this situation stems from a sharp reduction in term liquidity due to a general fear of withdrawal among providers of liquidity, e. g. money market funds, its unwinding requires an appropriate provision of central bank liquidity to the short - term interbank markets but not necessarily a change in the policy stance. in contrast to the enhancement of the interest rate channel, at least in normal times, financial innovation is traditionally expected to have weakened significantly the so - called bank lending channel. financial innovation gives firms broader access to securities markets and, as such, makes them less dependent on bank funding. similarly, banks may be more able to issue debt securities and less dependent on the constraint of funding themselves with secured deposits. moreover, securitisation by banks was expected to alleviate their liquidity constraints and thus to further weaken the credit channel. indeed, previous research has generally found that banks have used credit market innovations such as loan sales and securitisation to diversify credit risk exposures and increase lending. however, recent research has highlighted the potential for bank capital regulation and market discipline to shape a bank capital channel of monetary transmission. viewed as an extension of the

innovation and interdependencies, but also that of climate threats and inequality, and all with a worrying weakening, the world over, in public governance. a low price of time is as much a threat as an opportunity : a threat if we give in, in the short term, to the ease of abundant liquidity and allow financial instability to grow ; an opportunity if we use low rates collectively to invest in the future, from the ecological transition to education. you can count on our determination to act on the monetary side. but the battle is broader – it is our political challenge, collectively, as europeans – and it is longer term : it will be the challenge of your generation. i hope each and every one of you can contribute successfully to the fight. thank you for your attention. references : i i would like to thank chahinez benmissi, jean boissinot, adrian penalver, berengere rudelle and giulia sestieri for their help in preparing this speech. ii for a general discussion of the topic, see garnier o., lhuissier s., and penalver a., “ taux d ’ interet bas, quelle responsabilite de la politique monetaire? “, risques no. 120, december 2019. iii wicksell k., interest and prices, 1898. iv rachel l. ; smith t., “ are low real interest rates here to stay? ”, international journal of central banking, september 2017. v excluding energy and food. vi see notably : panel on “ behavioral economics and economic policy in the past and future ” federal reserve bank of boston conference : “ implications of behavioral economics for economic policy ” boston, massachusetts, speech by janet l. yellen, president and ceo, federal reserve bank of san francisco. https : / / www. frbsf. org / our - district / files / 0928. pdf or duca i ; kenny g. ; reuter a., “ how do inflation expectations impact consumer behaviour? ”, ecb paper, august 2016. vii international monetary fund, word economic and market developments, gita gopinath, october 2019. viii see notably rostagno et al. ( 2019 ), a tale of two decades : the ecb ’ s monetary policy at 20 ; hartmann and smets ( 2018 ). ix de pastor r., “ smes and vses in france