price pressures also holds at the global level with possible repercussions for the euro area. the commodity price giavazzi and giovannini ( 2010 ). bis central bankers ’ speeches pressures that i just mentioned reflect to a large extent strong demand from emerging economies and may not revert as quickly as if they were due to short - lived tensions in supply. moreover, with a continued strong expansion of money and credit in emerging economies, it is not clear to what extent such commodity price pressures will be absorbed within the economies and to what extent they may instead be passed on in what from the euro area perspective are import prices. we have seen this complex impact of commodity prices before, namely in the period from end 2005 to mid 2008. at the time, the warning signals for a more persistent upward pressure on euro area inflation were dwarfed by those coming from other asset markets, but we should take them serious now. monetary policy for the euro area can of course not control strong global liquidity trends, but it needs to take them into account and possibly apply a more restrictive view on domestic liquidity expansion than would otherwise be the case. 5. taken all available information together, latest economic developments suggest that the monetary policy of the ecb that has already been accommodative has become even more accommodative. in my view, risks to the medium - term outlook for price developments in the euro area as a whole could move to the upside. we therefore need to very closely monitor further developments. 6. in this respect, we need to keep a close eye on any signs of emerging second - round effects in the behavior of wages and price setters. should economic agents start to react to temporarily higher inflation outcomes this could give rise to a so - called wage - price spiral and higher inflation could become entrenched in inflation expectations. i can assure you that we will act quickly and decisively on any indications of emerging second - round effects and of a dis - anchoring of inflation expectations from levels consistent with price stability. the firm anchoring of inflation expectations remains of the essence. 7. to the extent that financial market conditions continue to improve and the current economic recovery turns out to remain strong and self - sustained, the stance would need to be normalised over time. in line with its mandate, the ecb will act taking into account economic developments both at the global level and within the euro area economy, as well as the further evolution of conditions in financial markets,

case, it is obvious that any funding support from the eurosystem would have to be carefully re - assessed, as our operational framework serves the implementation of monetary policy, and is not meant to cater for all individual banks ’ liquidity needs, irrespective of what causes them. in the euro area, it is the responsibility of the national central banks at their risk and cost, possibly guaranteed by the government, to act as the lender of last resort. banks should take all appropriate measures to reinforce their balance sheets as well as their capital base, thus creating conditions under which they can fund themselves in the market once market conditions return closer to normal. we do not know today what normality will look like after the crisis. we may have to perform our monetary policy in an environment that is somewhat different from the one prevailing before the turmoil. for instance, one might expect to observe higher liquidity and risk premia on the markets than during the period that preceded the crisis, and possibly also reduced activity in some longer - term unsecured market segments. if such changes imply that for any given policy interest rate, the monetary conditions are somewhat tighter than they would have been in the pre - turmoil period, that will of course have to be taken into account when setting the policy rate. but such “ new facts of life ” do not necessarily require any major change in the operational framework. we shall of course consider thoroughly what lessons are to be learnt from the crisis, but so far, the framework that prevailed prior to the turmoil, featuring a broad universe of counterparties, a long list of eligible collateral and large refinancing operations, seems to provide a good benchmark. it served us well before the crisis, and could be adapted quickly as circumstances worsened. 3. the interplay between fiscal and monetary policy while the current challenges for monetary policy are immense, those for fiscal policy are even greater. fiscal policy in most advanced economies does not just have to exit from the fiscal stimulus and support measures taken in response to the crisis. even with these measures reversed, fiscal policy still faces at least three important challenges. first, even excluding crisis - related stimulus measures, most advanced economies are still left with historically high deficit - to - gdp ratios, which, viewed from today ’ s perspective, are largely structural in nature. to put it another way, given the lower actual and potential post - bis central bankers ’ speeches crisis output and correspondingly lower post - crisis tax revenues, pre - crisis