united kingdom. 6 according to these studies, what matters is the extent to which and for how long central banks ’ holdings reduce the availability of assets by removing them from the market. this implies that we can continue to exert downward pressure on the yield curve by keeping our stock of asset holdings at a high level for a prolonged period. let me first state the obvious : even if we reduce the monthly flow of net purchases, we will continue to increase the size of our balance sheet. and let me add as a second consideration for 2 / 4 bis central bankers'speeches later : in any case, the eurosystem will remain in the coming years a major buyer of eurodenominated bonds thanks to our reinvestment commitment, which we took in december 2015 and which was perhaps not widely enough noticed : the repayments that we will obtain when bonds reach their maturity date will be fully reinvested, thus keeping the size of our asset holdings unchanged. most importantly, our monetary policy is based on a set of instruments [ slide ] : it is not a solo, but a quartet. on top of qe, we play with our policy interest rates, our forward guidance and the provision of liquidity to financial institutions. 2 / perhaps the most unconventional policy is the use of negative interest rates. i insist on the fact that this measure is the most unconventional because for most people, nominal interest rates are positive. it is true that negative interest rates have their limitations ; i have already stressed them in the past. 7 and at our governing council ’ s meeting in tallinn last june, we clarified these limitations in our forward guidance stating that we do not intend to lower our deposit facility rate below its current level of – 0. 40 %. but slightly negative interest rates have their virtues, even if they are not very popular among bankers. first, by removing the zero lower bound constraint on expectations of future short - term interest rates, they contribute to easing financial conditions by lowering rates along the curve, with a positive impact on the demand for credit by firms. second, the negative deposit facility rate ( dfr ) positively interacts with asset purchases. indeed, the portfolio rebalancing effect of qe is reinforced by the negative dfr, as banks with excess liquidity holdings have a stronger incentive to reduce these holdings and put their reserves to work. the truth of the matter is that we have not so far seen significantly detrimental consequences of negative rates on the profitability of banks, notably thanks

francois villeroy de galhau : with economic recovery underway in europe, what monetary policy? speech by mr francois villeroy de galhau, governor of the bank of france, at a lunch - debate at the centre des professions financieres, paris, 28 september 2017. * * * accompanying slides ladies and gentlemen1, it is a pleasure to be here with you for this lunch - debate of the centre des professions financieres. i would especially like to thank your chairman michel pebereau for his kind invitation. today, i am delighted to be able to speak to you on a highly topical subject : monetary policy in europe in the context of economic recovery. the prospect of a very gradual normalisation of our monetary policy gives rise to concerns and expectations. i will begin by focusing on what our accommodative monetary policy has already achieved today, before talking about prospects for the future. i. what is the situation today? economic recovery in the euro area is here [ slide ]. it is robust and broadly based across countries and sectors. our latest ecb forecasts2 confirm this : growth should stand at 2. 2 % in the euro area in 2017, i. e. a significant upward revision of 0. 3 point compared with june ’ s forecast of 1. 9 %. this means that for the second consecutive year, euro area growth will be comparable to that of the united states. and that, according to eurosystem calculations, the output gap will return to close to zero by the end of the year ( 0. 6 % ), even though france ’ s situation is less favourable due to its growth lag ( output gap of around 1. 4 % according to our calculations ). the non - standard monetary policy that we have been conducting since 2014 is contributing to this acceleration of growth in the euro area, by supporting domestic demand and by fostering very favourable financing conditions. in concrete terms, this acceleration results in more jobs – over 6 million jobs created in the euro area since the start of 2013 – and in a pick - up in investment. corporate investment in particular, decisive for supply capacities, is clearly recovering : up 4. 7 % in 2015, 6 % in 2016, and is expected to be up 4 % in 2017 and 2018 ). [ slide ] this improvement in investment is underpinned notably by ongoing growth in lending to the private sector, at 2. 5 % year - on - year in august 2017 for