mario draghi : president ’ s address at the 16th ecb and its watchers conference speech by mr mario draghi, president of the european central bank, at the conference “ the ecb and its watchers xvi ”, frankfurt am main, 11 march 2015. * * * summary in january, the ecb decided to expand its asset purchase programme to include government bonds after it became clear that there was a need for more monetary stimulus. asset purchases are unconventional, but not unorthodox, and they have been part of the ecb ’ s toolkit from the start. by deploying this tool, the ecb underlined its ability and determination to stabilise euro area inflation in line with its objective. the impact of the programme and the ecb ’ s previous monetary policy measures is visible : bank lending rates to companies started to decline in the third quarter of last year, marketbased measures of inflation expectations have reacted positively to the ecb ’ s balance sheet expansion over recent months, and euro area long - term sovereign yields have fallen – in spite of the renewed crisis in greece. this suggests that the asset purchase programme may be shielding other euro area countries from contagion, which also helps the ecb achieve its monetary policy goals across the euro area. the euro area economy grew more than expected in the fourth quarter and unemployment fell to its lowest level since august 2012 in january. while this cannot exclusively be attributed to the ecb ’ s monetary policy, it certainly supports the recovery. even though inflation is expected to remain very low or negative in the months ahead mainly due to the sharp drop in oil prices, it is expected to move closer the ecb ’ s policy target over the coming years to reach 1. 8 per cent in 2017 – conditional on the full implementation of all policy measures. the beneficial impact of the ecb ’ s asset purchases on financing conditions will increase the benefits of governments ’ structural reforms, rather than reducing incentives for reforms. firms will be encouraged to increase investment, bringing forward the economic recovery. * * * ladies and gentlemen, since the last watchers ’ conference in march 2014, we have reached deeper in our monetary policy tool box. the means have changed quite substantially, as dictated by circumstances, but the end has not. to be able to deliver on our medium term price stability mandate, we needed to adapt and expand our monetary policy tools. i would like to open this conference by elaborating on what has changed, how

those under which other central banks did so. it is claimed that this reduces the impact on bond yields. but, in fact if one standardises the size of the various programmes and takes into account cf. michael a s joyce, zhuoshi liu, ian tonks ( 2014 ) : institutional investor portfolio allocation, quantitative easing and the global financial crisis, bank of england working paper no. 510, http : / / www. bankofengland. co. uk / research / documents / workingpapers / 2014 / wp510. pdf. bis central bankers ’ speeches anticipation effects, the overall impact of our programme on bond yields was comparable in size to that observed in other jurisdictions such as the us and the uk. conditions also differ because financial structures differ. in the euro area, corporate debt financing mainly takes place via banks, as opposed to capital markets in the united states. there is, however, no reason, once the transmission channel is not impaired by banks ’ poor balance sheets, why this difference should impede the effectiveness of a broad - based asset purchase programme that works through a multitude of channels. the programmes of both the bank of england and the bank of japan were effective and the respective economies are almost as bank - based as the euro area. one criticism is that we should have implemented our asset purchase programme much earlier. but it is not that we have not been acting last year. in a speech in amsterdam in april last year i laid out three contingencies that would warrant a monetary policy reaction. these were, first, an unwarranted tightening of monetary policy stance ( e. g. from developments in short - term money markets ) that could be tackled through more conventional measures. second, a further impairment in the transmission of our stance, in particular via the bank lending channel, for which a targeted ltro or an abs purchase programme might be the right response. and third, a worsening of the medium - term outlook for inflation, which would warrant a more broad - based asset purchase programme. as these contingencies materialised we acted, first in june with the announcement of the tltro and abs purchase programme. then, as medium to long - term inflation expectations started to drift downward in the summer and the risks of a too prolonged period of low inflation were rising, we broadened our asset purchase programme with covered bonds in september and public sector securities last january. summing up, market reactions both before and after our announcement, as well as