steadystate benefits of all these developments, the potential side effects and transition problems are more difficult to assess. as a result, a holistic assessment of their impacts on systemic stability and economic efficiency is needed. but that is beyond the scope of my remarks today. what i would like to focus on is one issue in particular, namely the impact of recent policy interventions on market functioning. specifically, i would like to discuss three areas : the impact of unconventional monetary policy measures ; the impact of regulatory developments ; and the role of private – public partnerships in financial market reform. 1. the impact of unconventional monetary policies starting with monetary policy, the key issue is as follows. efficient price formation requires that large transactions can be rapidly executed at low cost with limited price impact – i. e. that markets are liquid. but are unconventional measures, such as negative interest rates and asset purchases, positively or negatively affecting market liquidity conditions and thereby that price formation mechanism? it is of course difficult to disentangle the individual effects of each of the policy measures we have taken in the recent years, as they have all been introduced as bis central bankers ’ speeches part of wider policy packages. still, there are some points that can be made about the tools in isolation. first, negative interest rates on our deposit facility. beyond some initial hesitation, the transition to negative rates has happened smoothly in both capital and money markets. the technical challenges related to the implementation of negative rates, notably in terms of market infrastructures, have been well anticipated and addressed by market participants, and we now have proof that market functioning below zero does not imply different logics and mechanisms. or as i said elsewhere, there is life below zero. 1 in particular, possible adverse effects of negative rates on general trading activities seem to have been limited. while volumes in the euro money markets have been declining, 2 they have been also impacted by the significant increase in excess liquidity as well as regulatory developments. a case in point is the volumes traded in the eonia market, which did fall substantially after the deposit facility rate was cut below zero in 2014, but are up 60 % since the beginning of this year. in addition, negative rates have been accompanied by receding fragmentation in the unsecured overnight money market, at least for the higher - rated counterparties. for example, the spread between rates paid by banks with an investment grade credit rating in formerly stressed and non - stressed jurisdictions is close to its pre - lehman level and significantly improved

information on activity in the third quarter – coming from various confidence surveys and indicatorbased estimates – continues to support the assessment that economic activity will grow robustly while possibly moderating somewhat. looking ahead to the remainder of 2006 and 2007, the conditions remain in place for the euro area economy to grow at solid rates around potential, with some volatility in the quarterly growth rates likely to emerge around the turn of the year. global economic activity has become more balanced across regions and is still robust, thereby providing ongoing support for euro area exports. investment is expected to remain strong, benefiting from an extended period of very favourable financing conditions, balance sheet restructuring, accumulated and ongoing strong earnings, and gains in business efficiency. consumption growth in the euro area should also strengthen further over time, in line with developments in real disposable income, as employment conditions continue to improve. risks to the outlook for economic growth are broadly balanced over the shorter term, although the recent fall in oil prices – if it were to prove lasting – has the potential to lead to somewhat stronger demand and output growth than embodied in our baseline scenario for activity in the coming quarters. over the longer term, risks to growth lie on balance on the downside, and relate mainly to the possibility of a renewed increase in oil prices, fears of a rise in protectionist pressures, especially after the suspension of the doha round of trade talks, and possible disorderly developments owing to global imbalances. as regards price developments, according to eurostat ’ s flash estimate, annual hicp inflation fell to 1. 8 % in september 2006, from 2. 3 % in august. although no detailed breakdown is available as yet, this relatively sharp decline seems to be the combined result of favourable base effects, given in particular the strong rise in oil prices a year ago, and the recent significant fall in oil prices. while the outlook for energy prices is uncertain, on the basis of current energy prices and the higher quotations on futures markets, overall inflation rates are likely to increase again towards the end of the year and in early 2007. as a consequence, we expect a considerable degree of short - term volatility in the annual hicp inflation rate, while the overall inflation rate will remain elevated at levels above 2 % on average in 2006 and is likely to remain so in 2007. in addition, risks to the outlook for price developments remain clearly on the upside. they continue to include a stronger pass - through of past oil price rises into