had at the beginning of 2012, or should it become necessary to further address risks of a too prolonged a period of low inflation, it remains unanimous in its commitment to using additional unconventional instruments within its mandate. this would imply altering early next year the size, pace and composition of our measures. ecb staff and the relevant eurosystem committees have therefore stepped up the technical preparations for further measures with a view to implementing them in a timely manner, if needed. indeed, all of our monetary policy measures are geared towards underpinning the firm anchoring of medium to long - term inflation expectations, in line with our aim of achieving inflation rates below, but close to, 2 %, and contribute to a return of inflation rates towards that level. extending the policy response extending our outright asset purchases towards other asset classes could be one option if we were to judge that the economy was in need of further stimulus. it is important though to constantly keep in mind our intention, our purpose in adopting further measures. asset purchases are not an end in themselves. they are not a target of monetary policy. they are an instrument of policy. to see this, let us conduct a thought experiment : faced with the circumstances we have now, how would we have reacted in normal times – that is, with positive policy rates and no impairments in transmission? in my view we would have lowered rates further by now. this reaction would have been consistent with and guided by the wealth of evidence gathered over time on the transmission of changes in our key interest rates to borrowing rates and to economic activity and inflation. bis central bankers ’ speeches so, when we say our measures intend to bring our balance sheet back to levels seen in early 2012, what we are really saying is that – given the current composition of the unconventional monetary policies that we have put in place – this is the amount needed to bring inflation in the medium term back to levels closer to 2 %. and in a bank - based economy such as the euro area, pinning down this amount rests crucially on the effectiveness of our measures in reducing the borrowing costs of households and firms. it follows from this that an important criterion for the choice of additional measures – if needed – should be their degree of influence over broad financing conditions in the private economy, scaled up to an amount of easing judged sufficient to achieve our price stability mandate. this might give rise to a trade - off : some assets might ex ante be more effective than others in reducing private borrowing costs, but might

channel. the abs purchase programme ( abspp ), which we first announced in june and which became operational in november, will help further lubricate the transmission process. it can activate the same scarcity channel that was found to be a critical ingredient in the success of the fed ’ s large scale asset purchase programme. this channel works as follows : abs purchases push down the market spreads paid on senior tranches, currently the main focus of our purchases. they do so by subtracting volumes from potential private investors in such tranches, and thus encourage banks to relieve the resulting scarcity by originating more abs. ultimately, they can only do this by creating more loans. the result is again an increase in loan supply. and as the supply of loans shifts to the right along a given demand for credit, lending rates adjust downward to create the necessary demand. in september we added an additional leg to our june package : purchases of euro area covered bonds ( cbpp3 ), again with a view to making credit more abundant and less expensive. covered bonds share some of the characteristics of the abs : notably, they are loan - backed securities where the same scarcity channel can be put to work. importantly, the cbpp3 has also strengthened the quantitative dimension of our policy. by increasing the pool of purchasable assets – and by communicating our intention that our combined measures will help bring the ecb ’ s balance sheet back to levels it had in early 2012 – we are providing guidance on the overall scale of our interventions ; a scale considered necessary to deliver the intended support to inflation and the recovery of the euro area economy. bis central bankers ’ speeches and in scaling up the volume of our measures, we have also broadened the scope of transmission. the tltros and the abspp primarily work through what is called a direct price and pass - through effect. that is, both measures are designed to ensure an unimpeded transmission of our actions to the ultimate borrowing costs of the private sector. purchases in the covered bond market will have a similar effect, but because of the size and liquidity of the market, other transmission channels may become more important in relative terms. in particular, our covered bond purchases will also activate two prime transmission channels of large - scale asset purchases : the portfolio rebalancing and signalling channels, which are more dependent on the size of the monetary stimulus. so, i think it is fair to say that our response so far has been flexible. the