to broaden our universe of eligible agency bonds, because our aim is not to become the largest creditor on the euro area. second, our programme is creating portfolio rebalancing effects as investors are displaced across asset classes – affecting risk preferences – and across jurisdictions – affecting the exchange rate. this process has multiple transmission channels to real economy but one key one is through banks : on the liability side, portfolio rebalancing reduces the cost of market debt for banks, and on the asset side, it increases the opportunity cost of holding henceforth still risk - free securities, such as government bonds, over extending loans to the real economy. third, asset purchases have a strong signalling effect. they send a powerful signal that we will not allow price stability to be jeopardized, which helps re - anchor inflation expectations and lower real interest rates. and they also signal that liquidity will keep expanding, which supports a flattening of the term structure and further supports the easing of real interest rates and the exchange rate. the effectiveness of these signalling effects is predicated on the implementation of our programme in full, as we have communicated – that is, we will maintain the pace and volume of our intervention until we see a sustained return of inflation towards a level below, but close to, 2 % over the medium - term. in all these ways, our asset purchase programme therefore represents a continuation and extension of our existing measures – it reinforces our credit easing and more generally the bank lending channel. in this sense, i share the view that “ quantitative easing ” is something of a misnomer. to be sure, the quantity dimension of large - scale asset purchases matters, but only insofar as it affects prices and hence credit conditions. at the same time, we have to clearly distinguish instruments and objectives. in extraordinary circumstances we may need new instruments to meet our traditional objective. but what anchors trust in the central bank is that our objective and strategy stay, constant – and this is even more important when monetary policy becomes more unconventional. for this reason, innovative ideas to change our strategy, such as targeting a price level, would in fact be counterproductive in the current environment. out goes also the misguided idea to increase our definition of price stability. to paraphrase a well - known quote, when the facts change, we might need to change our instruments – but we do not change our mission. managing the side effects in terms of reaching our objective, our package

of measures is already having strong effects – perhaps stronger even than many observers anticipated. the latest data on bank lending show continued improvements in the cost of credit, the availability for credit and the demand for credit. confidence has also notably improved, with the latest european commission economic sentiment indicator confirming the pick - up in both consumer and business confidence. and the more confident firms and households feel in the recovery, the more credit should continue to improve. crucially, our intervention in january also first halted and then reversed the fall in inflation expectations. for example, the 5 - year forward 5 - year ahead inflation - linked swap rate has risen from its trough of below 1. 5 % in january to more than 1. 8 % now. this helped lower real interest rates by almost 50 basis points at medium - term maturities. and it has also meant that we have experienced all the upsides of oil price shock in terms of lower input prices and higher real incomes and, by preventing second round effects, none of the downsides in terms of lower wage settlements and higher real debt burdens. still, despite the success of our programme so far, it is important that we do not get carried away. unconventional monetary policy must remain exceptional and time - bound. this is bis central bankers ’ speeches because the longer such measures persist, the greater the risks that can come with it. and in the euro area context there are two main risks that can in principle arise : first, greater financial instability ( and let me stress here i am talking only about the situation in the euro area and not in other jurisdictions ) ; and second, the delay of much needed structural reforms. to provide a framework for how to think about these risks i find it useful to invoke the wellknown “ tinbergen rule ”, which states that a macroeconomic authority must have at least as many instruments as it has objectives. in terms of the first risk – financial stability – one has to distinguish between conflicting and complementary objectives. in normal times, it might be appropriate for monetary policy to take financial stability into account in its assessment of the appropriate level of interest rates. the reason is that, especially if one extends the concept of the medium - term, raising rates to choke off excessive credit developments will actually contribute to our price stability objective. it helps to prevent deflationary episodes emanating from large financial crises. and the symmetrical argument is also true : lowering rates in a downturn to support the financial sector will safeguard the