let me be clear that the exchange rate is not a policy target, but it is important for growth and price stability. another sign of improved confidence is the larger than expected early repayment by counterparties in the first of our two three - year longer - term refinancing operations settled in december 2011 and march 2012. this indicates that banks are less uncertain about their bis central bankers ’ speeches funding prospects than a year ago. we will closely monitor conditions in the money market and their potential impact on the stance of monetary policy, which will remain accommodative with the full allotment mode of liquidity provision. the risks surrounding the economic outlook for the euro area continue to be on the downside. they relate to the possibility of weaker than expected domestic demand and exports, slow implementation of structural reforms in the euro area, as well as geopolitical issues and imbalances in major industrialised countries which could both have an impact on developments in global commodities and financial markets. these factors have the potential to dampen the ongoing improvement in confidence and thereby delay the recovery. annual inflation in the euro area has continued to moderate, falling from 2. 5 % in october to 2. 2 % in november and december and 2. 0 % in january, as we had foreseen. inflation is expected to decline to below 2 % in the near term. risks to the outlook for price developments continue to be seen as broadly balanced over the medium term, with upside risks relating to higher administered prices and indirect taxes, as well as higher oil prices, and downside risks stemming from weaker economic activity and, more recently, the appreciation of the euro exchange rate. inflation expectations for the euro area remain firmly in line with the governing council ’ s aim of maintaining annual inflation rates below, but close to, 2 %. our monetary analysis is consistent with price stability. the underlying pace of monetary expansion and loan dynamics remain subdued. the annual growth rate of loans to the private sector remains negative. to a large extent, subdued loan dynamics reflect the current stage of the business cycle, heightened credit risk and the continuing process of deleveraging. overall, inflationary pressures should remain contained over the policy - relevant horizon. taking the evidence together, this allows our monetary policy stance to remain accommodative. the impact of a low interest rate environment let me turn to the first topic that you have chosen for our meeting today, namely the implications of a low interest rate environment. the impact of

jean - claude trichet : hearing before the economic and monetary affairs committee of the european parliament speech by mr jean - claude trichet, president of the european central bank, at a hearing before the economic and monetary affairs committee of the european parliament, brussels, 26 march 2008. * * * madame la presidente, mesdames et messieurs les membres de la commission economique et monetaire, je me rejouis d'apparaitre devant votre commission aujourd'hui et de poursuivre notre dialogue regulier. je commencerai mon intervention par une evaluation de la situation economique et monetaire, en expliquant les raisons sous - jacentes a nos recentes decisions de taux. ensuite, je vous donnerai de plus amples explications sur la distinction operee par la bce entre la definition de notre politique monetaire d ’ une part, et la preservation du bon fonctionnement du marche monetaire d ’ autre part. zum abschluss mochte ich einige vorlaufige schlussfolgerungen fur die regulierung, aufsicht und stabilitat der finanzmarkte ziehen. economic and monetary developments since my previous appearance before the european parliament in mid december, inflation has remained at relatively high levels of above 3 %. the incoming information has confirmed our assessment of prevailing upside risks to price stability over the medium term, in a context of continued vigorous money and credit growth. strong upward pressure on inflation in the short term mainly stems from the recent increases in energy and food prices. looking ahead, the inflation rate is expected to remain significantly above 2 % for most of the year. hence the period of relatively high inflation rates will be more protracted than previously expected. the march 2008 ecb staff macroeconomic projections foresee hicp inflation to range between 2. 6 % and 3. 2 % in 2008, and between 1. 5 % and 2. 7 % in 2009. these projected ranges have shifted upwards, mainly as a result of higher food and energy prices. i should stress that the staff projections are based on a number of purely technical assumptions which are unrelated to policy intentions, such as the use of market expectations in the assumptions for short - term interest rates. in the view of the governing council, risks