price signals are easy to detect. households and businesses can adjust their behaviour accordingly. this topic will be covered in today's after - lunch session. however, when inflation is high or volatile, it is harder to distinguish policy - induced price signals from general price movements. in that kind of environment, price - based climate policy measures cannot take their full effect. furthermore, the green transition requires large - scale investments in technological innovations and renewable energies. this is the topic of today's morning session. such investments are easier to decide upon in an environment characterised by price stability. and they are easier to finance if term premia embedded in market interest rates are low. in the past, after a prolonged period of strong inflationary pressures, term premia remained at an elevated level. 2 this was due to a high degree of perceived inflation uncertainty. central banks should prevent any doubts from arising about monetary policy's pursuit of price stability. this will reduce the risk of persistently higher term premia, which would make financing the green transition more difficult. the second aspect i want to mention is linked to this transition : climate change and climate policies are transforming the underlying structures of our economies. policymakers, financial markets and the public have to deal with the uncertainty ahead. central banks can contribute to a common understanding of how climate change will affect the economy, for example output, inflation, interest rates and asset prices. central banks need to better understand and disclose these effects. and they need to disentangle them from other drivers of structural change like mounting pressure from demographics or a possibly less globalised world economy. we are therefore adapting our analytical and forecasting toolkits accordingly. of course, in order to do so successfully, central banks need to interact closely with the academic community. that is why we have devoted a large part of the first conference day to price stability as well as macro - financial implications of climate change. we want to be able to examine climate - related adjustment processes, with their sectoral and regional dimensions, in an international context. esteban rossi - hansberg has made influential research contributions in this regard, and i'm delighted he will be giving today's keynote speech. with emuse, the bundesbank has already developed a model geared towards this goal. by sharing our expertise, we can contribute to a common understanding of how climate change will affect the economy. policymakers, financial markets and the public thus have the chance to better deal with the uncertainty ahead. 2

mario draghi : hearing at the committee on economic and monetary affairs of the european parliament introductory statement by mr mario draghi, president of the european central bank, for the hearing at the committee on economic and monetary affairs of the european parliament, brussels, 8 july 2013. * * * madam chair, honourable members of the committee on economic and monetary affairs, it is a great pleasure for me to be back with your committee for our last exchange of views before the summer break. at this time, it is worth taking stock of progress over the past 12 months. clearly, financial conditions in the euro area today are more stable and resilient than they were last summer. this is partly due to our determined monetary policy actions. governments and parliaments have also played a key role in the relative return of confidence and stability by undertaking courageous reforms, at both the national and european levels. yet despite this progress, the euro area still faces considerable challenges. the economy is still weak. financial fragmentation remains. this challenges the very concept of the single market. small and medium - sized enterprises ( smes ) can find it difficult to access credit, particularly in countries under strain ; and several key steps remain to be taken to complete the banking union. these are the three topics that i will address in turn today. 1. economic and monetary developments let me first briefly discuss our recent monetary policy decisions. in may, the governing council of the european central bank ( ecb ) decided to lower the interest rate on the main refinancing operations by 25 basis points to 0. 50 % and the rate on the marginal lending facility by 50 basis points to 1. 00 %. the rate on the deposit facility was left unchanged at 0 %. these policy decisions took account of subdued underlying inflationary pressures over the medium term and they are expected to improve funding conditions across the whole monetary union. following its july meeting, the governing council stressed that the monetary policy stance is geared towards maintaining the degree of monetary accommodation warranted by the outlook for price stability and promoting stable money market conditions. it reiterated that its monetary policy stance will remain accommodative for as long as needed. furthermore, the governing council sharpened its communication by announcing that it expects the key ecb interest rates to remain at present or lower levels for an extended period of time. this expectation was based on the overall subdued outlook for inflation extending into the medium term, given the broad - based weakness in the real economy and subdued monetary dynamics. in the