does not take the place our primary objective, which is, and always will be, to safeguard price stability. yet ﬁnancing conditions play a crucial role on the road to price stability. these stake out the path the pepp needs to follow if it is to counteract the downward pressure on inﬂation brought about by the pandemic. what ’ s important to note here is that the governing council ’ s assessment of ﬁnancing conditions is a holistic one – that is to say, it considers all the non - ﬁnancial sectors, i. e. ( that is ) ﬁrms, households and general government. not just that – the governing council also takes information on board from the entire monetary policy transmission mechanism : from risk - free interest rates and government bond yields to corporate bond yields, all the way to banks ’ lending terms. so it assesses not just a single variable but a whole raft of factors. and that alone is one feature that sets our approach apart from yield curve control, a practice that has attracted much debate of late. but there ’ s more to it than just glancing at the indicators. if those indicators ﬂag changes, our job is to analyse exactly how those changes came about. you see, they can make all the difference for whether monetary policy needs to respond or not. after all, monetary policymakers don ’ t ( tonne ) always need to act if capital market interest rates pick up. if, for example, nominal interest rates rise because inﬂation expectations are approaching our inﬂation target, this would be a welcome development since it would indicate that our monetary policy measures are having the desired effect. equally, other fundamentals might improve, too. if the economic outlook brightens up, real interest rates will increase. this might be read in isolation as a deterioration in ﬁnancing conditions. a holistic assessment, though, would reveal it to be nothing more than a side effect that does not impair the improvement in the economic outlook. and last of all, not every ﬂuctuation in capital market interest rates feeds all the way through to ﬁrms and households. their ﬁnancing conditions normally respond to changes in interest rates at upstream stages of the transmission process only if those changes are of a more persistent nature. euro area government bonds saw yields increase somewhat recently, with the yield on bunds with a remaining maturity of ten years climbing by 28 basis points between mid - january and the end of february

outlook calls for it. when that time comes, there can be no lack of determination, even if rising interest rates increase countries ’ borrowing costs. this is important for the credibility of monetary policy. footnotes : 1. yates, c., all the coronavirus in the world could ﬁt inside a coke can, with plenty of room to spare, the conversation, 10. 02. 2021, https : / / theconversation. com / all - the - coronavirus - in - theworld - could - ﬁt - inside - a - coke - can - with - plenty - of - room - to - spare - 154226 2. deutsche bundesbank ( 2021 ), bundesbank round - up, annual report 2020, pp. ( pages ) 21 ff. 3. weidmann, j., the current crisis and the challenges it poses for economic and monetary policy, speech delivered on 22 june 2020. 4. weidmann, j., expectations matter, speech delivered on 26 september 2019. 5. deutsche bundesbank, households ’ saving behaviour during the pandemic, monthly report, december 2020, pp. ( pages ) 26 f. 6. deutsche bundesbank, one - off effects relating to covid - 19 in the hicp in 2021, monthly report, february 2021, pp. ( pages ) 63 - 66 ; deutsche bundesbank, the impact of the climate package on economic growth and inﬂation, monthly report, december 2019, pp. ( pages ) 29 - 33. 7. weidmann, j., too close for comfort? the relationship between monetary and ﬁscal policy, speech delivered on 5 november 2020. 8. haldane, a., inﬂation : a tiger by the tail?, speech delivered on 26 february 2021. 9. weidmann, j., the potential long - term effects of the coronavirus crisis on the economy and on monetary policy, speech delivered on 16 december 2020.