euro area “ term premium ” monetary policy shock, a euro area macro shock and a “ foreign ” shock. the responses are normalised to a 10 basis point impact decline in the rate expectations component. the model is re - estimated on yearly intervals over the period 2005 - 19, with the years 2005 - 06 and 2018 - 19 grouped together as 2005 data is only available from july 2005 onwards and the latest observation available for 2019 is 1 august. while the evidence presented suggests that, for a given shock size, rate cuts have a larger exchange - rate effect than changes in term premia, the sheer scale of the app means that the sharp decline in term premia has been an important driver of the euro exchange rate. in fact, according to the model, the cumulated negative impact of the term premium shock on the euro since mid - 2014 is more than double the contribution of the rate expectation shock. this reflects the fact that term premia have declined much more than rate expectations since mid - 2014. a role for term premia in influencing the euro exchange rate is in line with dedola et al. ( 2019 ). these authors point to several transmission channels through which the app has significantly affected the euro / us dollar exchange rate. at a basic level, there has been a clear correlation between changes in the relative balance sheet sizes of the ecb and the federal reserve and in the euro / us dollar exchange rate ( chart 6 ). the authors use announcements of quantitative easing ( qe ) type measures to predict future changes in the relative sizes of central bank balance sheets. in turn, they estimate the effects of these exogenous balance sheet changes on exchange rates – and other relevant asset prices – over time. chart 6 relative balance sheet, the usd / eur exchange - rate and qe announcements ( percentages and usd / eur ) source : dedola, georgiadis, grab and mehl ( 2018 ). notes : the upper panel shows the evolution of the relative balance sheet of the ecb and the federal reserve ( ecb / federal reserve in percentages ). the bottom panel plots the usd / eur exchange rate. across both charts, the blue ( yellow ) vertical lines indicate the dates of qe announcements by the ecb ( federal reserve ). latest observation : april 2019. the authors find that qe measures have had large and persistent effects on the euro exchange rate. chart 7 ( left side ) shows the impulse response of the nominal us dollar

the economic and the monetary side. as i said yesterday, on behalf of the governing council, our monetary policy stance is still on the accommodative side and the medium term outlook for price stability remains subject to upside risks. i said that at the same time, the financial market volatility and reappraisal of risk i have described this situation in an earlier intervention. see j. c. trichet ( 2005 ), “ monetary policy and ‘ credible alertness ’, ” speech delivered at the panel discussion “ monetary policy strategies : a central bank panel ” at the symposium sponsored by the federal reserve bank of kansas city, jackson hole, wyoming, 27 august. of recent weeks have led to an increase in uncertainty. given this high level of uncertainty, it is appropriate to gather additional information and to examine new data before drawing further conclusions for monetary policy in the context of our medium term oriented monetary policy strategy. that being said, our “ constant steady alertness ”, and determination to act in the future whenever it is necessary makes no doubt in the mind of observers. by acting in a firm and timely manner we will ensure that risks to price stability over the medium term do not materialise and that medium term inflation expectations remain firmly anchored in line with price stability. particularly in times of high financial market volatility this continued solid anchoring of inflation expectations is one of the most precious assets on which we can draw to rebuild and consolidate the confidence which ultimately will itself permit the return to a normal functioning of the financial markets. i thank you for your attention.