, suggesting the governing council disliked high inflation more than low inflation, and the de facto inflation aim – the bliss point of the loss function – was below 2 %. the ecb ’ s new inflation target implies that from now on the ecb ’ s loss function is indeed symmetric, with a bliss point at the ( annual ) inflation rate of 2. 0 %. these findings indicate that the ecb ’ s new target brings about a clear change in policy preferences. the symmetric 2 % inflation target under the new strategy thus serves as a buffer against deflationary risks and provides monetary policy with more space to react to a sharp decline in inflation. we also want to rein in the costs to the economy from a too high rate of inflation. a medium - term orientation for the inflation target also makes it possible, where necessary, to smooth out other economic shocks, such as shocks related to employment or financial stability. if actual inflation is slower or faster than targeted, monetary policy will respond to deviations gradually, considering the nature of the economic disruption. deviations estimated to be temporary may not be responded to at all, but seen through. * * * another topical and important theme in economic research and central banking is the interaction between monetary policy and inequality. at this conference there will be two sessions devoted to these issues. inequality is mainly explained by structural factors, and therefore policies other than monetary policy play a key role in addressing it. we know that monetary policy impacts inequality through two main channels : the income channel and the wealth channel. concerning the income channel, it is critical to note that the wages and employment prospects of low - income households are typically more sensitive to business cycles. therefore, monetary policy easing – by stimulating economic activity and creating jobs, increasing wages and enabling savings – can reduce income inequality. this was an important channel after the previous crisis, the great recession, and has been again in the present covid - 19 crisis. on the other hand, households ’ business and financial income are more responsive to monetary policy than labour income, and this impact of the income channel in monetary policy easing tends to benefit wealthier households more than low - income households. 2 / 3 bis central bankers'speeches as to the wealth channel, monetary policy easing generally makes the life of borrowers easier, but it can impact negatively on better - off households ’ savings. however, the overall net effect depends on the composition of household balance sheets. a fall in the interest rate affects different assets and liabilities differently

example that could help to strengthen the foundations of european productivity and competitiveness. climate change is not only an existential threat to our planet but also reinforces the urgency of europe ’ s economic renewal. the transition of our economies to sustainability calls for both right incentives and plenty of investment. and turning big time to renewable energy – which is going on in finland, in germany and all over europe – is also a major opportunity for businesses, which has to be enabled by consistent public policy. the central banks in the eurosystem are committed to climate policy and support the ongoing work for removing the obstacles holding back sustainable finance and the disclosure of climate - related risks. another structural challenge is to improve financial stability in the monetary union. the most critical lesson of the two past decades was how important financial stability is for real economy and employment. it has become clear that financial stability was grossly disregarded when the economic and monetary union was created – it was the ” neglected stepchild ” of maastricht, as the economist daniel gros has put it. 3 / 5 bis central bankers'speeches going forward, there are several initiatives already on the table, including those by germany, france, and the european commission. in my view the manifesto of 14 german and french economists, published last year, is a particularly substantive and important contribution. the manifesto proposed a synthesis uniting the core principles of ” german ” economic philosophy, which calls for a stability union with sound incentives and firm rules, and those of ” french ” economic thinking, which emphasizes economic governance with insurance and stabilization. in essence, such genuinely european synthesis could pave the way for a solid stability union, where the main responsibility for economic policies should rest with the member states. this responsibility can and should be balanced with the insurance provided by stronger common structures, designed especially to safeguard financial stability. for example, the european council of last december decided to create a credible liquidity backstop for the single resolution fund, to ensure that bank resolutions could be effectively managed without recourse to the politically damaging bail - outs at taxpayers ’ expense. finalizing the banking union also calls for a common european deposit insurance scheme to prevent cross - border bank runs that could be dangerously destabilizing for the banking systems. these remaining elements require convincing measures of risk reduction and possibly some coinsurance features to be feasible politically. in particular, legacy problems in the banking sector should be worked out in the member states, without shifting the risks to the euro area level.