liquidity keeps declining, as determined by the banks, there may be pressure on short rates to increase. to this picture we also have to add the international dimension – notably the risk of spillovers from the us. we already saw that the announcement of a tapering of outright purchases resulted in higher money market rates in europe. in this overall context, we decided to introduce an important change in our policy, announcing a form of forward guidance. we stated that we will keep our key interest rates at bis central bankers ’ speeches present or lower levels for an extended period of time, dependent on our assessment of medium - term prospects for inflation. it should be noted that, although compatible with our monetary policy framework, this represents a real innovation in our instruments. it is conditional, it has a negative bias and this forward guidance will change only when we change our assessment of the impact of economic and monetary conditions on inflation prospects. the new policy has already produced visible effects : the whole forward curve of euro rates up to two years came down immediately after our announcement. although it has in the meantime increased somewhat, it remains stabilised at levels lower than we saw before our announcement. for the future, we are as usual data - dependent – but if declining excess liquidity were to put undue upward pressure on short - term rates, we would have to address this problem. we still have several policy instruments available in our toolbox and will use them as needed. we will continue to manage liquidity conditions so as to maintain a stable monetary and economic environment that ensures our main goal of medium - term inflation below but close to 2 %. thank you for your attention. bis central bankers ’ speeches

##gt holmstrom ( 2011 ) 5 assume that part of future income stream of firms ( and the totality of the households ’ income ) cannot be pledged, meaning they cannot make their consumption or production plans contingent on contracts that can transfer numeraire from one period to rajan, raghuram ( 2005 ) “ has financial development made the world riskier? ” also as nber working paper n. 11728. see rajan raghuram and douglas diamond ( 2001 ) “ liquidity risk, liquidity creation and financial fragility : a theory of banking ” journal of political economy, vol 109, no 2 ( april 2001 ) and also by the same authors “ money in a theory of banking ” the american economic review, march 2006, and “ liquidity shortages and banking crises ", the journal of finance, vol lx, no. 2, april 2005. j. m. keynes ( 1930 ), treatise on money, vol ii, page 67. john r. hicks ( 1967 ) “ critical essays in monetary theory ” oxford at the claredon press and chapter 19 of the “ collected essays on economic theory : money, interest and wages ( volume 2 ), wiley - blackwell, 1982, where hicks ’ 1962 speech on liquidity is reproduced and updated. rajan raghuram and douglas diamond ( 2001 ) “ liquidity risk, liquidity creation and financial fragility : a theory of banking ” journal of political economy, vol 109, no 2 ( april 2001 ), page 290. bengt holmstrom and jean tirole ( 2011 ) “ inside and outside liquidity, the mit press. bis central bankers ’ speeches another. consequently, they must prepare for financial shocks and reinforce their liquidity position, thus generating a demand for liquidity. these authors distinguish between inside liquidity – created against pledgeable income – and outside liquidity, created by public entities backed by the state capacity to tax present and future income. this refers particularly to central banks, but also to the state budget via deposit guarantee schemes, occasional bailouts or social security programmes. outside liquidity also includes international cross - border lending. 6 inside liquidity can be excessive, as we saw before the crisis with the expansion of shadow banking and secured lending and repos with repeated re - hypothecation. this is why adrian and shin ( 2008 ) 7 question the relevance of monetary and credit aggregates in representing the overall liquidity situation, a fact that has clear regulatory implications