recently in medium - to longer - term inflation expectations is a cause for extra vigilance. in short, the latest data on the euro area economy point to a continued but increasingly fragile recovery and the uncertainties and downside risks surrounding the recovery have intensified. all the while, we are facing continuously sluggish money and credit dynamics – even if growth rates of some key aggregates have edged up in recent months. consistent with this subdued picture, the latest ecb staff projections foresee growth and inflation to pick up only gradually. and, by the end of the projection horizon, annual hicp inflation is still expected to fall short of our target of a rate of inflation of below, but close to, 2 % over the medium - term. it was against this backdrop of a persistently weak inflation outlook, a slowing growth momentum, and subdued monetary and credit dynamics that we decided on a package of bis central bankers ’ speeches measures between june and october to provide further monetary policy accommodation and support lending to the real economy. impact of june - october policy decisions the policy announcements since june, together with the rate cuts, have already led to a further considerable easing of the effective monetary policy stance – although the liquidity injections via the tltros and purchase programmes will only gain pace in the coming months. this additional easing is evident from various metrics of the market - based cost of financing. since the beginning of june, forward money market rates have shown steep declines across the maturity spectrum. now, the forward curve consistently lies below zero over a two - year horizon. eonia is not expected to exceed 25bps before well into 2018. the 3 - month euribor rate, which is an important conduit of monetary policy impulses to lending rates, dropped to all - time lows and now stands close to zero. and the policy decisions, in particular those announced in september, triggered a compression of spreads across other asset classes, including abs, covered bonds and sovereign bonds. the recent sharp compression of abs spreads since june is particularly important. to the extent this compression of secondary market spreads is passed - through, this would support loan origination and promote credit flows at lower lending rates. as indicated, this market response has materialised although the lion ’ s share of the liquidity injection of the measures is yet to come. in september, we conducted only the first out of eight tltros. notably in december, counterparties will have another opportunity to participate in the t

follows the long - standing monetary policy tradition in the euro area, which in view of our financial structure is centred on lending to counterparties. but, inevitably, this makes the overall scale of the measures to a large extent dependent on banks ’ autonomous decision to participate and borrow, which is itself influenced by banks ’ appraisal of the strength of the recovery and the prospects for a sustained rebound in credit demand. in conditions in which these expectations may be re - appraised, the force of the overall monetary policy stimulus that can be expected to be introduced through the tltro is bound to become more uncertain. the purchase programmes do not run into this problem. but the capital market segments they target are not as deep and liquid as their equivalents in other leading economies. this is particularly the case for the abs market, which has yet to recover from a protracted period of minimal issuance activity and disappearing trading traffic. ecb intervention will, in itself, partly mitigate this problem by encouraging issuance activity as well as the unfreezing of abs and covered bonds that are currently retained on intermediaries ’ balance sheets. however, these dynamic effects are difficult to estimate precisely. taken together, these factors mean that not only the efficiency of the measures per euro of liquidity injection, but also the overall scale of the measures is difficult to anticipate. balance sheet communication these considerations interact with our recent communication as follows : the clarification that the measures will have a sizeable impact on our balance sheet is a way to manage the second dimension of uncertainty, the scale. it underpins our commitment to ensure a powerful transmission of the measures adopted in june and september. and it gives reassurance that the liquidity injections will be scaled appropriately to ensure the intended macroeconomic impact, namely to bring inflation rates closer to 2 %, materialises. this reassurance provides market participants with a broad orientation on our future policy conduct that will help them navigate the uncertainties inherent in the current policy environment. this is all the more important since the tltros and the two purchase programmes are likely to gain pace only gradually. all in all, it should thus be clear that the balance sheet communication does not establish an additional target for monetary policy. instead, in assessing the ecb ’ s monetary policy measures, the primary metric of success remains their impact on inflation rather than on the balance sheet. so how will these measures contribute to stimulating higher inflation? the purchases of simple and transparent