news conference berne, 14 december 2017 andrea m. maechler introductory remarks by andrea m. maechler i will begin my remarks with a review of the situation on the financial markets, before going on to discuss the progress made in reference interest rate reform. situation on the financial markets let me start with developments on the financial markets. the monetary policy pursued by the large central banks was once again the focus of attention for the financial markets in the second half of the year. given moderate inflation growth, financial market participants are expecting only a very gradual normalisation of monetary policy across the world. against this backdrop, government bond yields have remained persistently low. muted expectations regarding a move away from expansionary monetary policy, coupled with favourable economic data and good corporate results, have contributed to largely positive risk sentiment on the financial markets. this has been reflected, for instance, in a stock market rally, lower yield spreads on corporate bonds and reduced demand for safe - haven assets such as the swiss franc. in this positive market environment, volatility has remained low and volatility for the us equity and bond markets, calculated using option prices, has dropped to record lows ( cf. chart 1 ). despite positive economic data in europe, european stock indices have risen only moderately. the stoxx europe 600 has climbed some 3 % since mid - year. one reason for the modest stock market performance in europe is the strengthening of the euro, which impaired corporate earnings growth somewhat. by contrast, us companies recorded a strong increase in profits. furthermore, the prospect of lower corporate tax rates raised expectations of higher profits in the future. against this background, us stock indices reached record highs. the s & p 500 has risen by about 10 % since mid - year. swiss companies have benefited from stronger demand from europe and the weaker swiss franc. the swiss stock market ( smi ) also made substantial gains, up some 5 % ( cf. chart 2 ). page 1 / 5 berne, 14 december 2017 andrea m. maechler news conference the low yields on ten - year government bonds from advanced economies have remained virtually unchanged since mid - year. in the us too, although key rate normalisation is underway and the federal reserve has initiated balance sheet reduction, longer - term yields have risen only marginally until now. on the foreign exchange market, the us dollar initially continued on the downward path it had been following since the beginning of the year. the dollar then strengthened again somewhat

october 2008 and april 2009. the governing council will continue to do what is necessary to preserve price stability and ensure the firm anchoring of inflation expectations over medium to longer - term horizons. such anchoring is indispensable to supporting sustainable growth and employment and also contributes to financial stability. let me also stress that, from the onset of the financial market tensions, the ecb has taken forceful action in its liquidity management, also through non - conventional measures, to make sure that banks are able to refinance themselves. our policy - making has been in a “ nonstandard mode ” for a considerable period of time. in october last year, we adopted a fixed rate tender procedure with full allotment for all main refinancing operations and longer - term refinancing operations with maturities of up to six months. in addition, the ecb expanded its list of assets eligible for use as collateral in eurosystem credit operations. as a result, the size of the eurosystem balance sheet has increased substantially during the financial turmoil, by around €600 billion between june 2007 and march 2009, mainly reflecting the expansion of liquidity provision to the banking system since last autumn. this is of particular significance for the euro area because the banking system plays a more important role in the financing of the private sector than in other major economies. at the same time, owing to the ecb ’ s liquidity management, overnight money market rates have fallen even more steeply than the key ecb interest rates since last october. money market rates in the euro area are now very low, also in an international comparison. overall, the provision and management of liquidity by the ecb have played a crucial role in the implementation of the ecb ’ s monetary policy. they have ensured that banks have adequate access to central bank funding so as to continue financing the economy and that liquidity constraints and perceived risks have not triggered a systemic crisis. the ecb will continue to foster the orderly functioning of money markets and the intermediation of funds by the banking system by taking appropriate measures, be they standard or non - standard. at the same time, the medium - term orientation of our monetary policy provides a clear and unambiguous signpost that will allow us to pursue a credible exit strategy from the current conditions of very low interest rates and extraordinary short - term liquidity support as the economic situation normalises. fiscal policies the economic downturn, discretionary fiscal measures to