case in 2009 following the collapse of lehman brothers. first, the persistence of low inflation across a range of statistical metrics was higher than in 2009. this reflects the fact that, at that time, disinflation was very abrupt with inflation rates expected to quickly revert back into positive territory. the current episode is characterised by a prolonged downward inflation trend, and we expect inflation to remain in negative territory until latter stages of this year. second, since last summer market measures of inflation expectations have become more sensitive to realised inflation, even at maturities and at horizons that we would normally expect to be more resilient. this is in stark contrast with 2009, where inflation expectations hardly moved, even over the shorter end of the inflation forward curve. finally, measures of core inflation are less sticky today compared to 2009, which implies a higher risk of second round effects materialising from low realised inflation and falling inflation expectations. this in turn creates a higher likelihood that, absent policy action, low inflation will become entrenched and will not bounce back when oil prices normalise. the importance of fulfilling the mandate in sum, what we saw was a real risk of not achieving our aim of an inflation rate of below but close to 2 % over the medium - term. and let me stress that there is no room for complacency when inflation stays too low for too long. there are real costs to falling short of our objective. those costs are both institutional and economic. first, in institutional terms, it is important to remember the very unique environment in which we operate in the euro area. it involves multiple actors in multiple countries, and optimal economic outcomes can only be achieved if each of those actors follows the rules in its domain, thereby ensuring a consistent set of policies at the aggregate level. this is why, for example, we constantly stress the importance of countries respecting the stability and growth pact rules. however, if we were to miss our mandate as soon as it became difficult to achieve, how would it affect the incentives of others in the euro area to fulfil their own mandates? could we still expect others to stick to their commitments – such as implementing structural reforms and fiscal consolidation – in difficult times? and perhaps even more importantly, would our credibility be preserved if we are given a narrow mandate but cannot deliver it? second, in economic terms, a too prolonged period of low inflation can negatively affect both consumption and investment. certainly, an oil price shock improves the terms of trade, increases

lower bound in a monetary union like the euro area. at this point, is moving from interest rates to asset purchases as the main instrument of monetary policy simply a linear progression? or does the specific institutional makeup of the euro area mean that there are non - linearities when the lower bound is reached, which in turn make large scale asset purchases of private and sovereign paper an exceptional tool? my own view is that when the central bank is in danger of missing its mandate, and it has a tool at its disposal that is both legal and effective, it has to use it. indeed, the governing council is unanimous that the asset purchase programme is a monetary policy tool in a legal sense. yet at the same time, it is clear that the design of an asset purchase programme including sovereign bonds has to reflect the specificities of the euro area institutional framework with a single monetary policy and many fiscal authorities. and the governing council decision reflects these considerations. we have taken a significant monetary policy step, showing that we have the capacity and determination to deliver our price stability mandate, and that we act in full independence. but we have also acknowledged, through the loss sharing arrangement, the reality that the euro area is not a fiscal union and it is for politicians, not central bankers, to decide if and when it will become one. importantly, the expanded asset purchase programme was also in line with the communication on our reaction function that we introduced last year to help observers understand our strategy in an environment of heightened uncertainty. in a speech in april 2014 president draghi laid out three contingencies that would warrant further policy action by the ecb. and as each of those contingencies materialised, we responded as we indicated we would. in particular, we communicated explicitly that should we enter our “ third contingency ” – a worsening of the medium - term outlook for inflation and / or a loosening in the anchoring of inflation expectations – we would deploy a broad - based asset purchase programme. it is bis central bankers ’ speeches therefore no surprise that market participants, seeing much the same economic and financial data as we do, have largely anticipated this move. it is important to keep this in mind as it helps clarify some misconceptions about what drives the governing council ’ s decisions. long - term nominal interest rates have declined by around 100 bps since the middle of last year precisely because we specified our reaction function and markets understood it. therefore, the argument that asset purchases are unnecessary because market interest