including those that are most relevant for the transmission of monetary policy impulses. in this sense, we will act whenever we anticipate that higher costs and price increases pose upward risks to price stability over the medium term. 8. the non - standard measures by the eurosystem have been necessary to enhance its support of credit flows to the economy and to ensure a proper functioning of the transmission of monetary policy impulses to households and firms. indeed, this approach has served the euro area economy well. money market spreads have come down significantly [ slide 2 : euribor / ois spread ], banks ’ funding risks have been reduced, and the lowering of our policy interest rates has led to lower bank lending rates, largely as intended [ slide 3 : bank lending rates ]. 9. yet, keeping policy rates at very low levels for a protracted period and at the same time generously providing liquidity to banks entails significant risks. as outlined in the 2010 annual report of the bank for international settlements ( bis ), asset price developments and risk spreads indicate that once again a “ search for yield ” may have started to play a role in an environment of near - zero rate policies. in particular, such a situation has the potential to increasingly over time distort market participants ’ perception of risks, such as liquidity and interest rate risk. a renewed under - pricing of such risks could again lead to misallocation of resources and to asset price bubbles. the period immediately preceding the start of the financial turmoil in august 2007 is a case in point. new financial fragilities may emerge which, in turn, may hamper the normalisation of rates. finally, maintaining interest rates very low for too long may reduce activity in money markets, delay necessary balance sheet bis central bankers ’ speeches adjustments by firms and households, set disincentives to governments for their efforts to consolidate public finances. 7 the ecb ( like other central banks ) faces a difficult balancing act between doing what is necessary to maintain a properly functioning monetary policy transmission mechanism and doing too much for too long, thus reducing incentives for market participants to make markets work as they should. in japan, the combination of zero interest rates and quantitative easing, while successfully containing liquidity problems of financial institutions, have had some detrimental effect on the intermediary function of the money market and on corporate bond issuance. 8 in our case, we saw that transaction volumes in the short term ( eonia ) money market increased and e

zero over the entire calendar year 2023 ( slide 12 ). the tpi, by contrast, is a new instrument in the ecb ’ s toolkit. its targeted orientation and conditionality ensure the smooth transmission of monetary policy, even in times of heightened uncertainty and volatility, thus enabling monetary policy to pursue its key task of maintaining price stability. by announcing possible interventions or, if necessary, by carrying out targeted, temporary interventions, the central bank can quickly restore confidence and prevent destabilising interest rate spirals, which might otherwise drag the euro area into a severe crisis. in this respect, the tpi is an expression of monetary rather than fiscal dominance. indeed, the announcement of the tpi is likely to have been an essential precondition for the ecb to be able to increase rates to such a large extent and so avoid a deanchoring of inflation expectations and ensure price stability. under the tpi, the ecb cannot counter persistent tensions that are due to country fundamentals. it could only do so in combination with a macroeconomic adjustment programme under the outright monetary transactions ( omt ) programme. these precautions ensure that market discipline is preserved. within the tpi there is no interest rate level that is targeted ; this level remains fully determined in the market, with the substantial differences in sovereign bond yields across euro area countries reflecting different fundamentals. the tpi can only be used to tackle disorderly dynamics that temporarily prevent price determination in the market. these conditions preserve the incentive for sound fiscal policies. fiscal discipline and structural reforms are the best protection against fiscal dominance the best protection against fiscal dominance is therefore a future - proof fiscal policy. this is precisely why the european treaties provide for a fiscal framework that permanently guarantees the central bank ’ s independence. the challenges for fiscal policy are likely to increase in future. as long as the yields on newly issued sovereign bonds surpass the average yields on outstanding debt, the interest burden will increase. for example, a prolonged period of high interest rates will gradually affect the interest - growth differential ( r - g ), which, in addition to the evolution of government primary balances, determines the development of public debt ratios ( slide 13, left - hand side ). whether ( r - g ) will become a burden in the medium term will largely depend on how fiscal policy will tackle the multiple structural challenges facing our economies. an ageing society, the need for higher defence spending in view of the changed geopolitical situation,