the outlook remain on the downside. they are mainly related to uncertain developments in global money and financial market conditions. higher commodity prices, weaker than expected domestic demand and export growth, and insufficient structural reforms in euro area countries could also negatively affect economic conditions. annual hicp inflation increased in november to 0. 9 %, according to eurostat ’ s flash estimate, following an unexpectedly strong decline in october to 0. 7 %. underlying price pressures in the euro area are expected to remain subdued over the medium term. we might experience a prolonged period of low inflation to be followed by a gradual upward movement towards inflation rates below, but close to, 2 % later on. this reflects the modest pace of the recovery and the fact that medium to long - term inflation expectations continue to be anchored in line with price stability. bis central bankers ’ speeches monetary and, in particular, credit dynamics remain subdued. the annual growth rate of loans to the private sector has stabilised at negative levels. weak loan dynamics continue to reflect primarily the current stage of the business cycle, credit risk and the ongoing adjustment of financial and non - financial sector balance sheets. recent monetary policy decisions based on this assessment of the current economic outlook, let me now explain in greater detail our more recent monetary policy decisions. in july this year, we introduced forward guidance to clarify the orientation of our monetary policy going forward in an exceptionally uncertain environment : we stated that we expected key interest rates to remain at present or lower levels for an extended period of time. this statement was conditional on an overall subdued outlook for inflation extending into the medium term, which is currently the case, as i have just explained. in line with our forward guidance, we decided in november to lower the key ecb interest rates further. the interest rate on the main refinancing operations was lowered by 25 basis points to 0. 25 % and the rate on the marginal lending facility by 25 basis points to 0. 75 %. the rate on the deposit facility was left unchanged at 0. 00 %. our forward guidance still remains in place : we continue to expect ecb key interest rates to remain at present or lower levels for an extended period of time. thus, monetary policy will remain accommodative for as long as necessary. adjusting interest rates is not always sufficient to maintain price stability. in this crisis, interest rate cuts have been transmitted more slowly and unevenly across euro area countries due to the fragmentation of financial markets. to address this problem, we

of the us subprime crisis, significant progress has been made on the regulatory agenda. unsurprisingly, there are mixed views on whether or not the implemented regulatory reforms are sufficient. j huerta de soto ( 2006 ), money, bank credit and economic cycles, auburn. bis central bankers ’ speeches in any case, the way representatives of the banking industry view matters is quite unlike the general public ’ s perception : while the prevailing impression among the public at large is that next to nothing has happened, industry representatives are already complaining of a surfeit of regulation. in my opinion, neither is true. regulation has been significantly tightened, but there can be no question of overregulation. the most important regulatory step was the introduction of stricter capital requirements and new liquidity rules under basel iii. the new capital adequacy rules that were implemented into european law by crd iv and crr with a transition period until 2019 require banks to hold better and more capital. according to the basel committee ’ s latest basel iii monitoring exercise, most large internationally active banks already meet the fully implemented capital minimum requirements. banks ’ loss absorbing capacity is much better than it was before the financial crisis. between mid - 2011 and end - 2013, the average cet1 ratio of large and internationally active german banks, for example, almost doubled from just 5 % to 9. 5 %. the leverage ratio of those banks improved from 1. 7 % to 2. 6 %. the introduction of the leverage ratio – which has a target ratio of 3. 0 % under basel iii – is without doubt a sensible supplementary measure to the risk - based capital requirements. starting in 2015, banks will be required to disclose the leverage ratio, with a view to migrating it to a pillar 1 requirement by 2018 after a final calibration. the leverage ratio is a useful complement as a backstop, all the more so as the basel committee has identified that risk weights for credit risk vary significantly across banks using an internal ratings - based approach. the risk - based approach must, however, remain a key element of the capital rules. having a leverage ratio as the single rule would offer banks problematic incentives to take greater risks. i therefore agree with my colleague mark carney from the bank of england who has said, in this context, that it is sometimes good to wear a belt and suspenders to prevent your trousers from falling down. that being said, the flaws of the risk - based approach need to