monetary policy stance for almost three years. yet, despite a reduction of the overnight interest rate to levels close to zero, banks in a large fraction of the euro area economy had not been reducing their lending rates at the same pace and, in some countries, in fact they had tightened credit conditions dramatically. the stimulus was not moving downstream to reach the real economy. that trend was reversed almost instantly after the june 2014 announcement. already over the summer of 2014 – even before the first operation was allotted in september of that year – lending rates plunged to levels unseen since 2010. why did this happen? the new facility gave banks a long - term source of funding at a very moderate cost on condition that they would lend the funds on to the economy. this turned up the competitiveness temperature in the market for bank credit which, up to that point in time, had become polarised between banks with scarce access to funding and limited capacity to create credit, on the one hand, and banks with normal access to funding on the other. none of the two types of banks had a capacity or an incentive to provide credit to the economy on affordable conditions. the new operation put all banks on the same funding footing and thus created the conditions for the banking industry as a whole to start competing again for good credit. as a result of tltros and, in due time, the other instruments that were added, bank lending rates for both firms and households have dropped by more than 110 basis points since 2014 and are now at historical lows. encouragingly, the improvement in credit conditions is occurring both 3 / 4 bis central bankers'speeches within and across euro area countries. borrowing costs in vulnerable countries are now approaching levels observed in the less vulnerable countries. euro area small and medium - sized enterprises ( smes ) appear to have particularly benefited from the increasing pass - through of policy rates. lending rates on very small loans ( below €250, 000 ) have declined by 177 basis points, and bank lending rates on all non - financial corporation ( nfc ) loans have declined by 113 basis points. this sharp decline in bank lending rates has also been accompanied by improvements in access to credit for firms and households. bank lending volumes have been on an upward trend. in january, lending to households recorded its fastest growth rate since may 2011, while corporate lending, as in the previous month, recorded its highest reading since 2009. since september 2014, when the first tltro was conducted, bank loans to households have increased by 3

david dodge : the right policies for today's global economy remarks by mr david dodge, governor of the bank of canada, to the chile - canada chamber of commerce, santiago, chile, 19 july 2006. * * * canada and chile both rely heavily on international trade and foreign investment for economic growth, and are both major producers of commodities. because we share these attributes, we also share a keen interest in the health of the global economy. so, what i would like to do this morning is talk about how the global economy has unfolded and what we can expect to see in the future. in doing so, i'll talk about some of the major forces at work in the global economy and the key challenges that they pose. then, i'd like to discuss the policies that will best help countries like ours to deal with these challenges, from both a domestic and an international perspective. the global economic context over the past few years, we have seen a strong expansion of the global economy. indeed, the rate of expansion has exceeded the growth rate of global potential output. this strong growth has led to higher prices for many of the primary commodities that our two countries produce. in turn, this has meant an improvement in our terms of trade and rising national incomes. this global growth has been rooted primarily in the economic strength of the united states and emerging asia. in the u. s. economy, growth has come from strong household demand, while net national savings have been negative. but in emerging asia, household demand has been weak, while net national savings have been very high. these forces have contributed to the global current account imbalances that are now such a concern. to be clear, when i say " global imbalances, " i am referring to the large and persistent u. s. current account deficit, which is mirrored by current account surpluses in asia and in many oil - exporting countries. these imbalances have grown to the point where the united states needs to attract 70 per cent of the world's capital flows to finance its current account deficit - clearly an unsustainable situation. i'll have more to say about imbalances, and how they can be resolved, in just a moment. but first, i should mention another important consideration in today's global economic picture. following events such as the asian and russian financial crises of the late 1990s and the bursting of the tech bubble earlier this decade, central banks around the world injected a lot