central bank could pursue price stability unconstrained by fiscal considerations. we did this by giving full independence to the central bank, while constraining fiscal policies through the rules of the stability and growth pact, and now of the fiscal compact. one can debate the details of this framework, but on its own terms it succeeded : in no cases have fiscal policies caused the central bank to lose its price stability focus. take the example of the ecb ’ s recent decision to extend its asset purchase programme. this has been taken in full independence to achieve our medium - term price stability mandate. and in our decision, we have taken into account the specificities of the euro area, meaning that we operate in an environment of decentralised national fiscal authorities, and the ecb has no mandate to engage in large scale pooling of fiscal risks. but we have also learned from the crisis that policy interdependence has different dimensions. there are more subtle interactions between policies than our framework initially acknowledged. and these involve not just monetary and fiscal policies but financial and structural policies as well. what is at issue is not the classic idea about one policy causing another to lose focus on its mandate. it is ex post coordination failure, where some policies miss their mandate, causing others to do more precisely to be faithful to their own – what one might call “ weak dominance ”. for example, if financial supervisors do not encourage a fast and efficient clean - up of bank balance sheets, central banks ’ interest rate cuts are less likely to be passed on to the classic reference is sargent, t., and n. wallace ( 1981 ), “ some unpleasant monetarist arithmetic ”, federal reserve bank of minneapolis quarterly review, vol. 5. see also the discussion in leeper, e. ( 1991 ), “ equilibria under “ active ” and “ passive ” monetary and fiscal policies ”, journal of monetary economics 27, p. 129 – 147. bis central bankers ’ speeches entrepreneurs. and this is exactly what we saw in the euro area until the single supervisory mechanism was decided. and if at the same time governments do not make it easier to open a new business, those entrepreneurs are less likely to ask for a loan and take advantage of those low financing costs. and this is also what we have seen. in short, monetary policy becomes more effective in impacting the real economy if other policies act in a supportive way ; and if they do not, it has less impact and expansion

##p over the current quarter to continue to be conducted at a significantly higher pace than during the first months of the year. we will purchase flexibly according to market conditions and with a view to preventing a tightening of financing conditions that is inconsistent with countering the downward impact of the pandemic on the projected path of inflation. in addition, the flexibility of purchases over time, across asset classes and among jurisdictions will continue to support the smooth transmission of monetary policy. if favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the pepp, the envelope need not be used in full. equally, the envelope can be recalibrated if required to maintain favourable financing conditions to help counter the negative pandemic shock to the path of inflation. we will continue to reinvest the principal payments from maturing securities purchased under the pepp until at least the end of 2023. in any case, the future roll - off of the pepp portfolio will be managed to avoid interference with the appropriate monetary policy stance. net purchases under our asset purchase programme ( app ) will continue at a monthly pace of 1 / 4 bis central bankers'speeches €20 billion. we continue to expect monthly net asset purchases under the app to run for as long as necessary to reinforce the accommodative impact of our policy rates, and to end shortly before we start raising the key ecb interest rates. we also intend to continue reinvesting, in full, the principal payments from maturing securities purchased under the app for an extended period of time past the date when we start raising the key ecb interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. finally, we will continue to provide ample liquidity through our refinancing operations. in particular, the latest operation in the third series of targeted longer - term refinancing operations ( tltro iii ) has registered a high take - up of funds. the funding obtained through tltro iii plays a crucial role in supporting bank lending to firms and households. these measures help to preserve favourable financing conditions for all sectors of the economy and thereby underpin economic activity and safeguard medium - term price stability. we will also continue to monitor developments in the exchange rate with regard to their possible implications for the medium - term inflation outlook. we stand ready to adjust all of our instruments, as appropriate, to ensure