was very high. inflation expectations had become more sensitive to that low inflation and were declining at all horizons. and measures of core inflation – without food and energy – had become less sticky, implying a higher risk that the oil price fall would feed into lower wages ( so - called “ second round effects ” ), and so would not just bounce back when that effect faded away. this posed a risk to our mandate, and also the credit easing we were aiming to engineer. remember that if second round effects set in and people start to expect lower inflation in the future, then real interest rates rise – that is, interest rates adjusted for inflation. and if this happens, then any easing of nominal credit conditions is effectively neutralised as the real cost of finance increases. in fact, by january 2015 expected real rates had started rising – increasing by almost half a percentage point in the previous few months alone. the cost of deflation protection had also gone up by 185 basis points between 2 december 2014 and 9 january 2015, showing that investors saw a material risk that inflation could fall further and real interest rates could rise more. in this situation, it was absolutely essential that we re - anchored inflation expectations and warded off this potential tightening. and as we could no longer cut our main interest rates, we resorted to asset purchases to achieve this. what was crucial for us was to send a very strong signal that we would not allow price stability to be jeopardised. the only asset class that we could purchase in large enough volume to have that effect was public sector securities. the data so far suggests that this signal came at the right time and, as a result, our credit easing package is indeed having positive results. defined as those with positive turnover in the last six months seeking a bank loan. see speech by mario draghi, “ monetary policy in prolonged period of low inflation ”, sintra, 26 may 2014. bis central bankers ’ speeches since we announced our purchase programme in january, real interest rates have fallen along the yield curve, driven by both a flattening of the term structure of interest rates and, crucially, by a reversal in the decline of inflation expectations. market - based measures of inflation expectations have increased at all horizons, and as they rise back to levels consistent with medium - term price stability real interest rates should further decrease. bank lending data have also been steadily improving. the cost of borrowing for euro area firms has fallen by around 45 basis points since the summer of last

the very beginning. but we think that as far as the corrective arm of the pact is concerned it is important to fully preserve the nominal benchmark of 3 % deficit and the integrity of the excessive deficit procedure. the commission proposes. the council will decide. it was, and it is, our duty to say what we think taking into account the crucial importance of the stability and growth pact for the cohesion of economic and monetary union. in any case, whatever the decision is we will be faithful to our mandate and maintain price stability. [ question ] in this context of low growth and low output, the fact that the population is ageing plays an important role too. is that a factor that the ecb takes into consideration? [ answer ] that is a very important feature. in many euro area countries we are seeing a gradual increase in the less dynamic and less active part of the population, which in general leads to a fall in consumption and investment with the resultant negative effect on the economy. that is another reason why reforms of the health and pension systems and the labour market are crucial. in some countries, specific policies have been adopted to correct this demographic trend. [ question ] of course, low growth in productivity also has an impact on inflation. [ answer ] of course. low growth in productivity means higher unit labour costs. cost - generated inflation tends to rise, and that certainly does not make the ecb's task any easier, given that our job is to maintain price stability within the monetary union. [ question ] on the subject of inflation, the ecb has estimated the euro area's non - inflationary potential growth rate to be between 2. 0 % and 2. 5 %. can you confirm that estimate? [ answer ] the ecb relies in this field also on assessments of market economists ’ consensus and on analyses conducted by other major international organizations. we have noticed that this estimate has been revised downwards recently. if i were to mention a figure today, i would say that a number of estimates are getting closer to 2 % than to 2. 5 %. [ question ] drawing to a conclusion this structural analysis of the european economy's problems, allow me to ask you one more question on the economic climate. what is the ecb's forecast for growth in europe in 2005? is the monetary institute optimistic? [ answer ] we are neither optimistic nor pessimistic. rather we are realistic and humble in front of facts and figures. the ecb