. as regards instruments, we have used both : • the “ standard ” instrument par excellence : interest rates. the ecb ’ s monetary policy has been very accommodative for several years, with key interest rates currently at historically low levels and negative real interest rates in large parts of the euro area. • a broad range of “ non - standard ” instruments that can be grouped into two categories : i ) liquidity - providing instruments ( with the fixed rate full allotment policy, the expansion of eligible collateral, and the extension of maturities up to three years with the vltros ) and ii ) instruments making it possible to intervene directly on the most dysfunctional market segments ( the cbpp and smp ). this diversification and broadening of the eurosystem ’ s interventions has naturally raised questions about the ultimate goals pursued, the methods used and the possible risks incurred. in this critical period, we were convinced of the need to build a solid, robust and clearly defined foundation for our actions. in particular : • we have always acted and will continue to act within the framework of the mandate assigned to us by the treaty : our priority objective is to maintain price stability, defined as an inflation rate below, but close to 2 % over the medium term. fears concerning the possible inflationary effects of our policies are therefore completely unfounded. • moreover, we have always acted, and will continue to act, totally independently from the political authorities. it has always been perfectly clear that the responses to the real roots of the crisis can only be provided by the governments themselves and that monetary policy can never durably mitigate political shortcomings. thus fears regarding the financing of euro area states are also groundless. focus on omts i would like to conclude by presenting in greater detail the most recent ecb measure, known as outright monetary transactions ( omts ). to understand the logic and power of this instrument, we need to make a brief excursion into monetary policy theory ( before lunch … sorry! but it ’ s not that complicated ). as you know, central bank monetary policy impulses are transmitted to the real economy via several different channels. in the euro area, with bank loans accounting for three quarters of the economy ’ s total financing, the “ credit channel ” is by far the most significant vector. in normal times, if the ecb lowers its key rates, the banks ’ financing costs decrease, allowing them to pass these lower costs on to the

services. and on activity, we avoided recession last year with 0. 7 % growth, and will again avoid it this year. but the somewhat disappointing gdp stagnation in q4 published yesterday confirms that risks on growth are clearly tilted to the downside. with such a “ disinflationary slowdown ”, the direction of the travel is clear : our monetary policy will go from restrictive towards neutral, and should support a gradual recovery while ensuring inflation is at our target. how fast and how far should we go in this travel? this is where what i call “ agile pragmatism ” and our data driven approach will guide us. i don ’ t want to bother you today with a sophisticated discussion about the precise level of r * … furthermore, long term yields have increased, limiting the easing of overall financial conditions. ii. a more challenging view on long - term yields a ) unusual divergence between short and long - term rates the ecb, since last june, and the us federal reserve, since last september, began a rate cutting cycle and both have reduced their policy rates by 100 bp last year. but over the same period longer term yields have increased, particularly in the us which is very unusual compared to previous easing cycles. the us 10 - year yield is now up by more than 80 basis points since the fed started cutting rates and the so - called “ trump trade ” began while previous easing phases were initially associated with a fall in long yields. page 3 sur 6 in the euro area, long - term rates have also increased but to a lesser extent and the us 10 - year spread relative to ea ois has risen by 80 bps over the same period. b ) what can explain this rise in long yields? the sovereign debt trajectories and the elevated global policy uncertainties are likely the two main factors. fiscal deficits remain high in many advanced economies ( us, uk, fr ) ; even in germany, fiscal policy might become more expansionary after the elections. uncertainty about the trajectory of public finances is putting upward pressure on sovereign yields. macroeconomic factors are also at play, even though quite differently on both sides of the atlantic. in the us, the risk of future trade restrictions and possibly immigration policies keep uncertainty about the outlook and inflation high, directly affecting risk premia. in the short run, these measures are akin to negative supply shocks and likely to be inflationary, before possible reversal in the longer run as aggregate demand could weaken