banks as well as temporary purchases of assets, both private and public. circumvent the zero lower bound and bring down real long - term interest rates through purchases of government bonds, and / or interest rate guidance. as a consequence, central banks ’ balance sheets expanded by a factor of three, dramatically increasing their role in financial intermediation and sometimes raising concerns, at least in some quarters, about the possible inflationary impacttogether, this diversification and the increase in size have created more complex interactions with fiscal policies. specifically, asset purchases are sometimes seen as “ quasi fiscal policies ” both on the asset side ( due to the potential risks attached ) and the liability side ( when they contribute significantly to meeting the funding needs of the sovereigns ). bis central bankers ’ speeches at the time they were decided, those exceptional interventions were absolutely necessary. although it had been forgotten, central banks were initially created to protect the economy from excessive financial disturbances. this was, historically, their “ raison d ’ etre ”. as ultimate and unique providers of liquidity, they cannot escape this responsibility and let the financial system and the economy collapse. at the same time, by doing so, central banks have exposed themselves to a number of risks first, there are risks linked to balance sheet expansion. they cannot be ignored, although all central banks have been extremely careful in valuing the assets purchased or taken as collateral. second, they run the risk of blurring the lines between fiscal and monetary responsibilities. a dynamic use of their balance sheets by central banks has effects on the allocation and distribution of resources in the economy. they may favour or penalise some types of collateral or certain borrowers. if central banks take on additional responsibilities in the area of financial stability, they will have to do so in close cooperation with fiscal authorities, thus exposing themselves to possible interferences with monetary policy. the major risk, however, is the risk of confusion. a multiplicity of interventions could be interpreted as a relative dilution of objectives. there is a tendency by market participants and some policymakers to consider central banks to be “ universal problem solvers ” whose balance sheets can be used, without cost, for all purposes. there is also a doubt, at least an ambiguity, in the minds of some analysts, about the true purpose of government bond purchases. central banks ’ activism may create doubts as to their ability to stick to their core mandate – price stability – in the face of increasing pressures and constraints.

overall, the euro area is well protected against all of these risks thanks to the robustness of its institutional framework price stability is unambiguously the priority objective of monetary policy monetary financing of governments is strictly prohibited the eurosystem ( the ecb and national central banks ) is extremely well capitalised, which protects its independence. this has allowed the eurosystem to implement nonstandard measures on a large scale without endangering its credibility. of course, we do not control fiscal policy. we will never accept a situation where fiscal imbalances could constrain monetary policy. it is very important, therefore, that credible fiscal consolidation takes place across the euro area. this will make it easier for the eurosystem to be active in protecting financial stability. on the contrary, doubts over governments ’ resolve to ensure the sustainability of public finances would make us powerless to fight instability and expose the euro area to great dangers. now for the more normative aspects. we may have to live with nonstandard measures for a long time. indeed, some central banks have adopted interest rate guidance announcements covering the next two years. it is likely that monetary policy will, for some time, make use of a diversity of instruments. macro - prudential measures will interact with monetary policies in a complex way. in that context, it is therefore all the more important to keep clarity of purpose and stick to two crucial features inherited from the pre - crisis consensus : the focus on price stability and, its corollary, central bank independence. there should be no ambiguity about what central banks are trying to achieve. the more non - conventional their actions, the less obscurity there should be as to their ultimate purpose. non - conventional measures, like any others, can only achieve their objectives if inflation expectations are solidly and clearly anchored. from that point of view, calls by some economists and market participants for a temporary relaxation of price stability objectives bis central bankers ’ speeches are, in my view, totally misguided. i find it significant, on the contrary, that two major central banks have recently decided to quantify their price stability objectives and enhance their communication accordingly. bis central bankers ’ speeches