. in such circumstances, we focus on the need for robustness and completeness of the analytical framework to assess the risks to price stability. our approach is based on two pillars : the economic analysis and the monetary analysis. the economic analysis takes into account a broad set of economic and financial indicators to assess the short to medium - term price trends. the monetary analysis permits a cross checking of the economic analysis by drawing on the longer - term close link between the money stock and the price level from a medium to long - term perspective. in this way we trust that the ecb ’ s monetary policy takes into account in real time all relevant information. overall, i have no doubt that the ecb ’ s approach to monetary policy will ensure that price stability will be maintained on a lasting basis in the euro area, in this way providing a crucial contribution to economic growth. let me now explain to you how, by doing this, we have contributed and continue to contribute to a sustainable non - inflationary growth path. how we have contributed and continue to contribute to sustainable non - inflationary growth the “ magnetic north ” of our compass is the maintenance of price stability over the medium term. since 1999, the medium to long - term inflation expectations, extracted either from the ecb survey of professional forecasters or from surveys conducted by private institutions such as consensus economics, have remained in line with our objective of price stability, fluctuating within a narrow band around 1. 8 % - 1. 9 %. it is true that actual inflation has several times risen above the ceiling of 2 % since 1999. but this occurred in a difficult environment with many adverse price shocks. however, this has not jeopardised our achievement in anchoring medium to long - term inflation expectations. moreover, anchoring long term inflation expectations at moderate levels has allowed to maintain short - term, medium - term and long - term market interest rates at low levels, thereby offering very favourable financing conditions to consumers, investors and companies. this low level of market interest rates is the result of the high level of credibility that the ecb and the euro immediately inherited from the national central banks and from the most stable national currencies that existed before 1999 ; contrary to what some observers were forecasting, the euro was not build as an average of the former national currencies, displaying a yield curve that would be the average of the yield curves prevailing in the countries deemed to join the euro area ; the euro inherited immediately the yield curve

ensuring that monetary policy is efficiently and effectively carried out. the success of monetary policy in delivering price stability relies on the effectiveness of monetary policy transmission. central banks have direct control over short - term interest rates only. monetary policy decisions affect prices through various channels - acting directly on the expectations of economic agents as well as influencing, inter alia, banking credit conditions, the exchange rate and other asset prices. it is quite obvious that a correct and orderly transmission of monetary policy to the economy requires a sound and stable financial system. financial instability may distort the transmission of monetary policy and ultimately reduce its effectiveness in maintaining monetary stability and contributing to long term sustainable growth. the second crucial aspect is that conditions in financial markets in general, and financial stability considerations in particular, always need to be part of the overall assessment of economic conditions and the analysis of risks to price stability. this is an analytically challenging and very information - demanding exercise, in which central bankers have to be involved. in this respect, a number of historical episodes have shown that financial instability can pose very difficult challenges to monetary policy. a much - debated specific case is the possible emergence of large misalignments in financial prices or asset price bubbles, a well - known symptom of imbalances in the financial system. episodes of large “ booms and busts ” in asset prices are dangerous and may result in self - reinforcing spirals that are a significant threat not only to the stability of the financial sector but, more generally, to macroeconomic stability. monetary policy cannot avoid taking into account these threats. in practice, it is extremely difficult to identify asset price bubbles in real - time. even after the fact, there can be debate on whether a bubble really existed or whether expectations had been misguided. i should add that it appears very useful to look at developments in credit and monetary variables, which often in the past signalled the build - up of dangerous financial imbalances in the economy. as you know, the eurosystem assigns a specific role to the monetary aggregates within the framework of its two pillars approach of its monetary strategy. credit being one of the counterpart of m3, it is therefore carefully followed, which is important from the perspective of monitoring the preconditions for the build - up of the financial imbalances. having said that, what should be the response of monetary policy to the possible emergence of financial instability? the above considerations lead me to the following remarks. first,