of economies like china and india has led to sharply rising energy demand from these countries. this demand has contributed markedly to the increases in oil and commodity prices over the past couple of years. it is difficult to estimate the net effect of these developments on the overall price level in industrial countries. but, in my view, there are no reasons to assume that the overall outcome has been one of a more benign inflation outlook. taken all together, there are reasons for exercising caution with regard to the popular globalisation story of inflation. in other words, in my view, the real effects of globalisation on the inflation process are an issue that should be of some interest for monetary policymakers. but, at the end of the day, the importance commonly attached to globalisation forces is less clear than popular views often assume. the decline in trend inflation worldwide is better explained by monetary policy in many countries being geared towards price stability, which is enhanced by the increasing independence of central banks in achieving their goals. globalisation will have played a supportive role, but, in the final analysis, it is monetary policy that is responsible for medium to long - term inflation outcomes. financial globalisation and the transmission of monetary policy another aspect of globalisation with potential crucial implications has to do with the impressive growth in cross - border financial flows. as domestic asset prices are increasingly determined by global factors, the transmission channels of monetary policy measures might change as well. this is especially relevant to long - term interest rates as they constitute one of the main variables through which monetary policy influences economic outcomes and inflation. does globalisation mean that monetary policy is losing its leverage over domestic long - term interest rates? and if so, does this mean monetary policy is becoming ineffective? i do not want to go too much into the details. let me just make two points : first, even if it is true that long - term interest rates are increasingly determined on the global capital market, this by no means renders monetary policy ineffective. one of the workhorses of international macroeconomic theory, the mundell - fleming model, dealt with precisely this issue some 40 years ago. and you are familiar with the result that, as long as you operate a flexible exchange rate, monetary policy becomes the more effective the higher the degree of capital mobility is. the exchange rate channel then more than compensates for the decline in the ability to influence long - term rates. second, one might debate whether influence over long - term rates is the most important way in

and this applies in both directions : the people of the euro area should be protected against any spurt in inflation and against deflation. over ten years ago the ecb defined price stability as an annual inflation rate of below, but close to, 2 % in the medium term. for this year, however, we can expect price increases of only 0. 6 %, for 2015 only 1. 1 % and for 2016 only 1. 4 %. this clearly shows why our current very accommodative monetary policy stance is not only economically appropriate, but also a necessary measure to fulfil our treaty obligation. the governing council is unanimous on this point. at the heart of this accommodative strategy is undoubtedly the fact that the ecb has steadily cut the interest rate on the main refinancing operations to its lowest possible point in recent years. however, the still existing functional deficits of the financial markets are hindering an optimal transmission of the monetary policy signals coming from this very low interest rate. small and medium - sized enterprises in particular still aren ’ t feeling enough of the monetary policy accommodation. we call this an impaired transmission mechanism. that ’ s why the governing council unanimously adopted in june a series of measures which will improve the transmission of our monetary policy : first, we decided to continue to conduct our main refinancing operations as fixed - rate tender procedures with full allotment for as long as necessary, and at least until december 2016. banks will therefore receive as much liquidity as they need as long as they can offer adequate collateral. second, we have reduced the interest rate on the deposit facility to below zero for the first time and cut it further last week. by the way, this is not to punish the banks, as i have often read. rather, we are giving them an incentive not to park liquidity at the central bank, but to pass it on in a productive way to the real economy. in an environment in which it is already difficult for businesses to gain access to capital for their own investments, it is important that banks also provide sufficient funds for profitable projects. third, we have decided, within a framework of eight targeted longer - term refinancing operations, to make available long - term liquidity to banks for a period up to 2018 – in proportion to their credit volume relative to the real economy. thus, banks are encouraged to bis central bankers ’ speeches lend to enterprises in the euro area. at the same