key ecb interest rates were not being passed on to firms and households to the same extent in every euro area country. we were witnessing a serious disruption in the monetary policy transmission mechanism which, if left untended, would have posed a profound threat to price stability. the ecb responded with two sets of policies. first, central bank liquidity was made available to banks for up to three years, and the range of collateral that banks could use to access central bank money was expanded. this helped reduce fragmentation in banks ’ funding conditions. second, the ecb announced outright monetary transactions ( omts ) in the summer of 2012, which removed redenomination risk in government bond markets stemming from fears of a possible euro area break - up. 1 / 4 bis central bankers'speeches yet the sovereign debt crisis left a deep scar on the economy. unemployment rose steeply, firms cut back on investment and loan delinquencies increased. even though financial fragmentation was diminishing, banks began to shrink their balance sheets and became less willing to lend. this produced a renewed cycle of contracting credit growth and weak demand dynamics. inflation drifted downwards. with inflation now well below our objective, the ecb faced a new type of policy challenge. we needed not only to repair the transmission problems created by deleveraging banks. we also needed to expand our policy stance to counteract deflationary pressures. so in june 2014 we launched our targeted longer - term refinancing operations, which once more provided long - term liquidity to banks – but conditional on extending credit to the private sector. we introduced negative rates on excess reserves to further encourage banks to lend to households and businesses. and soon after, we announced our asset purchase programme ( app ), buying asset - backed securities and covered bonds. faced with a continued decline in inflation and a heightened risk of a de - anchoring of inflation expectations, in january 2015 we expanded the app to include public sector securities. since then, both the size and duration of our asset purchases have been recalibrated in response to changes in the inflation outlook. our asset purchases have also been complemented by further cuts in policy rates and the use of forward guidance. communicating our expectations about future policy, along with the conditions that would warrant a change in the policy stance, has successfully contributed to reducing uncertainty around the expected future path of short - term interest rates, thereby helping to preserve accommodative financial conditions. supported by these policy measures,

bojan markovic : national bank of serbia ’ s outlook on inflation speech by mr bojan markovic, vice governor of the national bank of serbia, at the presentation of the inflation report, belgrade, 16 may 2012. * * * ladies and gentlemen, esteemed members of the press and fellow economists, declining steadily over the last year, inflation fell in april to 2. 7 % year - on - year, its lowest level since comparable records are available from the beginning of 1980. consistent with our projections from the previous inflation reports, the inflation figure is slightly below the lower bound of the target tolerance band for april. from may, however, we expect inflation to rise at a moderate pace and to move temporarily around the upper bound of the target tolerance band in late 2012 and the first half of 2013, only to return back towards the target thereafter. gross domestic product declined in the first quarter due to extremely cold weather, but also due to the contraction in economic activity of our key foreign trade partners. recessionary trends in the euro area will continue to have a negative impact on the serbian economy in the remainder of the year, but modest economic growth of 0. 5 % is still expected in 2012 given the start of production in the automotive industry. the national bank of serbia last revised its key policy rate in january by cutting it down to 9. 5 %. in april, the national bank of serbia amended the decision on required reserves, lowering the fx reserve requirement ratio and increasing the share of fx required reserves to be allocated in dinars. * * * the new inflation report comes out at a time of post - election uncertainties as to how fast the future government will be formed. from the viewpoint of fostering macroeconomic stability and lowering the country risk premium, it is desirable that the future government is formed promptly and that it undertakes efficient fiscal consolidation measures to cut the budget deficit and contain public debt. this also includes the continuation of the arrangement with the international monetary fund, which will help improve the perception of country risk, and thus contribute to the stabilisation of financial markets. the euro area sovereign debt crisis showed some signs of abatement following successful implementation of the debt swap agreement between greece and private investors and expansionary measures by the european central bank, but in the last few days uncertainty appeared again over the formation of the new greek government. furthermore, as indicated by the contraction of economic activity in the past two quarters, the situation in the euro area ’ s real sector remains