lower in the euro area than in the united states ( see chart 7 in masuch, k. et al. ( eds. ) ( 2018 ), “ structural policies in the euro area ”, occasional paper series, no 210, ecb, june ). these factors may limit the euro area ’ s relative capacity to bounce back from a recession. 21. if the yield curve gets unanchored it becomes harder for the central bank to deliver inflation at target and minimise side effects on the economy. 22. we have a medium - term orientation in pursuing price stability to account for the lags in the transmission of monetary policy to the economy and to inflation. the definition of medium term, however, is flexible because the appropriate monetary policy response to a deviation of inflation from the target depends on the origin, magnitude and persistence of the deviation. see ecb ( 2021 ), “ an overview of the ecb ’ s monetary policy strategy ”, july. 23. battisti, l. ( 1970 ), emozioni.

##er of the security. the premium will then depend on the scarcity of the underlying 3 / 10 bis central bankers'speeches asset and their holding structure : many of the residual government bond holders are unwilling to sell them, or will sell them at a higher price due to regulation or their own asset - liability management rules. you can see this on my next slide. our asset purchases have coincided with a notable increase in the share of german bonds that trade “ special ” in the repo market, meaning they trade at a premium over gc rates. before we started our purchases, typically less than 5 % of bonds in the german repo market were trading special. in the second half of last year, this share increased to more than 50 %. year - end events, which i will come back to later, pushed their share even higher. you can also see that specialness did not increase immediately with the start of our purchases under the public sector purchase programme ( pspp ) in march 2015. the reason might be related to potential non - linearities in the way supply changes affect market outcomes. that is, price effects from the flow of purchases may only become visible the moment supply effectively starts to constrain demand. reverse supply effects are also clearly visible on the same chart. when the ecb governing council, in december last year, decided to also accept cash as collateral in our securities lending facility, we effectively increased the supply of bonds available in the repo market, thereby swiftly reducing the share of bonds trading special. 7 the price effects of this decision can be seen on the next slide. before we accepted cash as collateral, there was a strong positive relationship between the level of excess liquidity and repo rates, not only for trades backed by german collateral, but also for those involving french and, to a lesser extent, italian securities. the moment we amended our securities lending facility in december last year, the relationship broke down, as you can see on the right - hand side. 4 / 10 bis central bankers'speeches recent ecb analysis confirms the intimate relationship between cash and repo markets and the impact of supply and demand effects. 8 the authors estimate that a 1 % reduction in the effective supply may increase specialness, on average, by up to five basis points. studies for the us market come to qualitatively similar conclusions. 9 in other words, whether a bond trades special, and by how much, depends crucially on its effective supply, which is itself