considerable time. i have focused so far on the possibility of a deterioration in the bank's profits and impairment of its capital deriving from the difference between interest income on jgbs and interest payments on excess reserve balances of financial institutions'current accounts at the bank. however, attention also needs to be paid to the fact that a similar issue could arise ; for example, in case of a fall in the prices of etfs and j - reits – of which the bank's holdings have increased under qqe. it also is important to note that a decrease in the bank's payment to the government, by way of causing a decrease in government revenue, could be the trigger for the public to clearly acknowledge the costs of qqe, which had been hard to discern without such a decrease. in other words, it will be widely shared among the public that the bank, through its pursuit of qqe, is deeply involved in income distribution. although the deterioration in the bank's profits and impairment of its capital that i mentioned earlier may not directly hinder its business operations, the possibility cannot be denied that these could negatively affect the stability in the value of currency in some way. in addition, the bank has communicated its stance that it will implement the policy measures necessary to achieve price stability while giving consideration to its financial soundness. however, given the bank's accounting rules under which the capital adequacy ratio is maintained at around 10 percent, within the range of about two percentage points above or below that level, speculation in financial markets could be raised that the bank might, as economic and price conditions improve, place priority on maintaining financial soundness over price stability and maintain interest rates on excess reserve balances of financial institutions'current accounts at the bank at relatively low levels. 5. side effects of qqe with a negative interest rate qqe with a negative interest rate may have additional negative effects on financial institutions'profits, mainly through a narrowing of interest rate margins on loans and a reduction in yields on financial assets, and this potentially could undermine financial system stability. it also should be noted that financial institutions – to compensate for deterioration in their profits – could pass on costs to their depositors and borrowers by, for example, not only lowering deposit rates but also increasing lending rates and transaction fees. this conversely could lead to monetary tightening effects. in addition to such side effects, my concern is the possibility of impairing the sustainability and

services and factor markets. as a means of cross - checking, we have equipped ourselves with another perspective, which we refer to as the “ monetary analysis ” and that is grounded on the belief that medium to long - run price developments can be attributed to the growth rate of the stock of money. each of these “ pillars ” is, in turn, characterised by a rich and comprehensive analysis of a large amount of data. for example, within the “ economic analysis ” we monitor the developments in prices and unit costs, overall output, aggregate demand and its components, government finance accounts, capital and labour market conditions, exchange rates, financial markets, balance sheets of households and firms, etc. the ecb ’ s “ economic analysis ” has been significantly extended and enriched over time. this is largely thanks to the progress made in the production of euro area general economic and financial statistics and in the analytical processing of such information. as mentioned above, the inaugural publication of integrated financial and non - financial quarterly accounts for the euro area, hopefully in 2006, will be another milestone. the ecb and the national central banks use a variety of models for macroeconomic analysis and forecasting. the macroeconomic projections by eurosystem staff constitute an important input into the monetary policy decisions, because they are a way of organising a large amount of information and they help to create a consistent picture of possible future developments. however, the economic projections cannot encompass or even reflect all the complexities, conditioning factors, nuances and the multi - dimensional nature of a comprehensive assessment of the risks to price stability on which monetary policy decisions need to be based. while the information synthesised from various indicators serves as an important input into the decision - making process, the governing council of the ecb does not take decisions only on the basis of projections. the governing council ’ s “ judgement ” must eventually come into play in order to assess the likelihood of the alternative scenarios suggested by the economic analysis. this is particularly important when it is quite unclear how a certain situation will evolve, as is the case sometimes with sharp movements in asset prices. related to this, attempts to base monetary policy decisions solely on inflation forecasts would involve significant limitations. notably, they would entail an inefficient use of information, since every forecast, or any composite index of indicators, is based on one possible scenario and one combination of assumptions. in the end, monetary policy requires judgement on the part of the policy - maker to assess not only the pl