##ncies ) over periods of up to six months against an expanded range of eligible collateral. as a result, the size of the eurosystem ’ s balance sheet increased by 37 % during the fourth quarter of 2008 to a total of just over €2 trillion at the end of last year. this simultaneous easing of monetary policy and liquidity provision was fully consistent with the separation principle and the medium - term orientation of our strategy because of the new constellation of risks to price stability and financial stability. the unprecedented reduction in the ecb ’ s policy rates and the extraordinary increase of liquidity in the money market have been helping to mitigate the impact of the processes of disinflation and deleveraging on the real economy. consequently, they have been containing the possible emergence of “ endogenous ” risks to price and financial stability. at the same time, we continue to be confronted with exceptionally high uncertainty. the transmission mechanism of monetary policy has been affected by the strains in the money market and the ongoing adjustment of banks ’ balance sheets as well as by the increased risk aversion and reduced confidence of consumers, firms and investors. accordingly, we will continue to monitor closely all relevant developments. in early march, with the benefit of additional information and the ecb staff macroeconomic projections, we will assess the medium - term outlook for price stability and the associated potential risks. if inflationary pressures are diminishing and risks to price stability are assessed to be on the downside, a further easing of monetary policy may be appropriate in order to maintain inflation over the medium term at a level consistent with price stability, that is, below, but close to, 2 % and keep inflation expectations firmly anchored in line with this objective. an important issue which has been discussed extensively recently is whether the persisting strains in the money market and the significant tightening of credit conditions – and the possible emergence of supply constraints – in the bank credit market require further measures to be taken by central banks and governments in order to preserve financial stability and support the recovery of the economy. such measures have been taken or pledged in the past in the united states, the uk and the euro area. and yesterday, the us government announced an extensive new package of measures to “ stabilise and repair the financial system, and support the flow of credit necessary for recovery. ” 3 in the euro area, as i previously noted, the ecb has already taken non - standard measures in the past by changing aspects of its operational framework to

not be equity support. likewise, in pricing out break - up risk in sovereign debt securities, we cannot and do not want to subsidise governments. placing the ecb ’ s monetary policy in the broader context of central bank non - standard measures let me briefly digress to put our monetary policy and its impact on borrowing conditions in the context of unconventional monetary policies deployed by central banks more generally. to begin with, the remuneration that investors demand on a long - dated security should be at least as large as the expected return from a strategy of rolling over short - term instruments and the risk premia that investors demand over and above the return from the rolling over strategy. premia, in turn, are a composite object. they compensate investors for different risks attached to term investments : • the term risk premium for holding on to an asset for a specific period of time ; • the liquidity risk premium as the compensation for the possibility of incurring losses when selling the asset back to the market before maturity and at short notice ; and • credit risk premia of various types as compensation for the possibility of not receiving at maturity repayment for the principal because, for instance, borrowers may renege on their contractual obligations. at the risk of oversimplifying, one can distinguish the main types of unconventional measures depending on which component in this decomposition they are aiming to address. forward guidance about the intended path of the central bank ’ s monetary policy rate in the future mainly aims to manage expectations regarding the future evolution of the short - term interest rates. it thus addresses the expectations component i was referring to before. changes in the level of the current policy rate always have an intrinsic signalling content with respect to possible changes for short - term rates in the future. but during crisis times, when short - term nominal rates are at zero or close to zero, they cannot be adjusted further down. the central bank may then engage in active communication reassuring markets that the future path of policy rates would not deviate from the current low level for a certain period or until certain observable conditions are verified. bis central bankers ’ speeches large - scale asset purchases, or quantitative easing, instead, mainly aim to compress the term premium. 2 this type of policy intervention works through reducing the supply of securities with long duration and increasing the supply of reserves or liquidity. with less term risk to hold in the aggregate, the market should require a lower premium to hold that risk. the ecb ’