while the medium - term orientation of our monetary policy strategy allows us to “ look through ” such price developments if they are temporary in nature, there were two reasons why we feared this would not be the case. first, while the fluctuations in inflation in the second half of the year were clearly being driven by supply factors, there were strong signs that the trend was being driven by weak aggregate demand. this was visible both at the macro level in a still wide output gap and a declining rate of core inflation ; and at the micro level in subdued negotiated wages and low pricing power among firms. in other words, we were not facing merely a downward shock to prices, but also a downward shock to inflation dynamics – a sustained adverse development. second, because of this weak underlying trend in inflation, there was a higher risk that the oil price fall could feed into second round effects. indeed, several factors suggested that the situation was more worrying than past episodes of oil - induced disinflation, particularly the most recent case in 2009 following the collapse of lehman brothers. our analysis showed that the persistence of low inflation across a range of statistical metrics was higher than in 2009. inflation expectations had also become, at all horizons, less well anchored to our objective and more sensitive to that low realised inflation, whereas in 2009 they hardly moved at all. and measures of core inflation had become less sticky, implying a higher risk that this low realised and expected inflation would become entrenched in wage setting behaviour ( chart 6 ). also relevant was the fact that this loosening of inflation expectations occurred while policy rates were already at the effective lower bound. at the lower bound a fall in inflation expectations implies a rise in real interest rates, so this development risked generating a contractionary effect that would offset, at least in part, the benefits of the fall in oil prices. moreover, given high debt levels in parts of the euro area, this would be amplified if second round effects set in and real debt burdens increased, as borrowers tend to have higher propensities to consume and invest than lenders. it was in this context that we moved into the third contingency by engaging into outright asset purchases. this began in september 2014 with our announcement that we would purchase asset - backed securities and covered bonds. and it was then scaled up in january 2015 with the addition of public sector securities to our purchase programme. these asset purchases work in two main ways. first, they have a signalling effect, which contributes to

for the real economy. credit impulse is an important indicator to reflect changes in the financial cycle, including the direction of marginal changes in the cycle. measured by the marginal change in the ratio of newly added credit to gross domestic product ( gdp ), china's credit impulse has turned positive and upward since 2023, indicating that the credit is playing an increasingly important role in supporting the economy. since the beginning of 2023, the forecasts for china's economic growth have been revised upward in general. the international monetary fund ( imf ) revised its forecast for china's economic growth this year from 4. 4 percent to 5. 2 percent. and just two days ago, the world bank raised its forecast from 4. 3 percent to 5. 6 percent. the competitive real interest rate of rmb assets is conducive to the value preservation of the rmb held by china's trade and investment partners. measured by the difference between the yield on 2 - year government bonds and the core consumer price index ( cpi ), china's real interest rate is around 1. 7 percent, which is similar to that in the united states after a sharp hike, and is significantly higher than that of developed economies such as germany and japan. amidst the worldwide elevated inflation, the value of rmb bonds as a portfolio diversifier is highlighted. since 2022, both the government bonds and equities have experienced an obvious decline in developed countries, representing a shift from negative correlation to positive, so the benefits of bonds as a portfolio diversifier for equities have decreased sharply. as for emerging markets, their bonds are always highly correlated with global equities, as they are risky assets. in contrast, chinese bonds maintains a negative correlation with the global equities, hence a better diversifier. 2 / 3 bis - central bankers'speeches since 2023, our foreign exchange market has been generally stable. cross - border capital flows have maintained a basic equilibrium, compared with a relatively high surplus at the beginning of the year. foreign exchange reserves have witnessed steady growth, and the rmb exchange rate has remained basically stable at an adaptive and equilibrium level. since mid - april, affected by various internal and external factors, especially the strengthening of the us dollar index due to the us debt ceiling issue, the rising risk aversion driven by small and medium - sized bank risks, and the heightened expectations for fed rate hikes, and considering that the foundation for the economic recovery in