single supervisory mechanism ( ssm ), which are well underway. our internal preparations aim at ensuring that the ecb will be ready to assume its supervisory responsibilities in november 2014. we will make sure that the ecb ’ s monetary policy mandate focused on price stability will not be affected by considerations and decisions related to banking supervision. internal rules are therefore being developed for the separation of monetary policy and supervisory functions : the units involved in decisionmaking will be clearly separated. we are putting in place an organisational set - up whereby the information flow between the two functions will be limited to a “ need to know ” basis. however, we will avoid unnecessary duplication of structures not involved in the decisionmaking process. this is cost - efficient, and i am sure you will appreciate this. as regards recruitment of staff, i can say that the process for senior and middle managerial positions is well underway. further recruitment initiatives will start in due course. an important element of our preparations is the comprehensive assessment, which comprises a supervisory risk assessment, an asset quality review and a stress test performed in cooperation with the european banking authority ( eba ). this exercise will increase transparency by enhancing the quality of information available. it will facilitate the repair of the sector by identifying the necessary corrective actions. and it will build confidence by assuring all stakeholders that banks are fundamentally sound. it will be concluded shortly before the ecb assumes supervisory responsibilities. the ecb convened a series of meetings in november in frankfurt with the banks that will undergo the comprehensive assessment. these meetings were positively received and provided the useful opportunity to have a first exchange of views, to receive feedback on our communication, and respond to questions. we also explained that we would welcome prompt action from the banks, beginning now, to strengthen their balance sheets including profit retention and equity issuances. other elements of the comprehensive assessment are on - going. the process for the selection of asset portfolios to be reviewed for the asset quality review was initiated in november, based on specific data collections. furthermore, we expect to announce the key parameters of the stress test exercise together with the european banking authority ( eba ) towards the beginning of next year. in this context, let me explain again the treatment of sovereign bonds : the asset quality review is a valuation exercise where we will apply the current regulatory framework. it is not for us to change this framework – this is a global discussion, and the basel committee is the right forum for it. that said, we will of

the outlook remain on the downside. they are mainly related to uncertain developments in global money and financial market conditions. higher commodity prices, weaker than expected domestic demand and export growth, and insufficient structural reforms in euro area countries could also negatively affect economic conditions. annual hicp inflation increased in november to 0. 9 %, according to eurostat ’ s flash estimate, following an unexpectedly strong decline in october to 0. 7 %. underlying price pressures in the euro area are expected to remain subdued over the medium term. we might experience a prolonged period of low inflation to be followed by a gradual upward movement towards inflation rates below, but close to, 2 % later on. this reflects the modest pace of the recovery and the fact that medium to long - term inflation expectations continue to be anchored in line with price stability. bis central bankers ’ speeches monetary and, in particular, credit dynamics remain subdued. the annual growth rate of loans to the private sector has stabilised at negative levels. weak loan dynamics continue to reflect primarily the current stage of the business cycle, credit risk and the ongoing adjustment of financial and non - financial sector balance sheets. recent monetary policy decisions based on this assessment of the current economic outlook, let me now explain in greater detail our more recent monetary policy decisions. in july this year, we introduced forward guidance to clarify the orientation of our monetary policy going forward in an exceptionally uncertain environment : we stated that we expected key interest rates to remain at present or lower levels for an extended period of time. this statement was conditional on an overall subdued outlook for inflation extending into the medium term, which is currently the case, as i have just explained. in line with our forward guidance, we decided in november to lower the key ecb interest rates further. the interest rate on the main refinancing operations was lowered by 25 basis points to 0. 25 % and the rate on the marginal lending facility by 25 basis points to 0. 75 %. the rate on the deposit facility was left unchanged at 0. 00 %. our forward guidance still remains in place : we continue to expect ecb key interest rates to remain at present or lower levels for an extended period of time. thus, monetary policy will remain accommodative for as long as necessary. adjusting interest rates is not always sufficient to maintain price stability. in this crisis, interest rate cuts have been transmitted more slowly and unevenly across euro area countries due to the fragmentation of financial markets. to address this problem, we