and thereby forestalling a wider systemic crisis which would jeopardise our primary objective of price stability. the interest rate instrument and the size and maturity composition of our liquidity - providing operations are instruments that can be used independently of each other, but only to a certain extent and not continually for different purposes. specifically, concerns about funding support must not come to dominate monetary policy considerations. the level of our key interest rates will, as always, be adjusted in response to changes in the outlook for price stability. but, because our non - standard measures were targeted at specific problems in the money market, our decisions about how and when to unwind them will also depend on how funding risk evolves. we would expect a gradual recovery in funding markets and further improvements in credit conditions for the non - financial sector to go hand in hand with the establishment of a sustained economic recovery. but it is impossible to forecast these developments with any certainty. a scenario cannot be entirely ruled out where upside risks to price stability emerge while the problems in money markets persist. we might then have to maintain the structure and size of our balance sheet. but, at the same time, we would have to raise interest rates to counter upside risks to price stability. we would be confronted with the need to steer money market interest rates to higher levels while excess liquidity continued to prevail in money markets. it is therefore crucial to monitor the sources of funding constraints for banks. we need to judge whether these funding constraints relate to individual banks rather than to the functioning of the money market and the banking system as a whole. our operational framework is not designed to counter funding problems at the individual bank level. rather, our funding support is designed to alleviate funding risk to the extent that it is systemic. therefore, we would seek to re - establish the key features of the operational framework that was in place before the crisis and to revert to a situation in which the one - week main refinancing operation is the main tool for steering short - term money market rates and we are “ rate - takers ” in the longer - term money market. based on our economic and monetary analyses, we will continue to monitor very closely all developments over the period ahead. we will ensure that the measures taken are unwound in a timely fashion and the liquidity provided is absorbed in order to counter effectively any threat to price stability. to sum up the monetary policy considerations : the monetary policy measures and nonstandard measures taken during the

liquidity, the governing council progressively increased the interest rates on the main refinancing operations by 225 basis points between november 1999 and october 2000 with the aim of maintaining price stability in the medium term. in particular, the aim was to prevent the shocks in question from affecting medium to long - term euro area inflation expectations. despite the prolonged impact of sharply rising food prices, it emerged in 2001 that, on account of weakening demand and the gradual reversal of monetary trends, lower interest rates were required in order to maintain price stability over the medium term. accordingly, the governing council decided to see poole, 2004 and issing, 1999. lower interest rates from the spring of 2001 onwards. in so doing, the governing council reacted in a timely fashion to a number of negative demand shocks which later continued in the context of global uncertainties ( such as those related to the terrorist attacks on 11 september 2001 and the wars in afghanistan and iraq ). since june 2003 the governing council has kept interest rates steady, with the minimum bid rate on the main refinancing operations remaining at the historically low level of 2. 0 %. since the second half of 2003 prospects for a gradual economic recovery have brightened. however, as a consequence of adverse food price developments and higher oil prices - although the latter were attenuated by the appreciation of the euro - it was only in early 2004 that inflation fell below the upper ceiling of 2 % laid down in the definition of price stability. in line with the medium - term orientation of the ecb ’ s monetary policy, interest rate adjustments in response to economic shocks have generally been made gradually, thereby avoiding frequent shifts in the ecb ’ s policy stance. this non - activist policy has contributed strongly to stabilising medium - term interest rate expectations in accordance with the definition of price stability. it has also ensured that, in the face of strong share price fluctuations resulting from the initial new economy euphoria and the subsequent disillusionment, monetary policy has not itself become a source of destabilising expectations. this has helped to anchor long - term inflation expectations at levels consistent with price stability. the medium - term perspective of the ecb ’ s policy is also indicated by the fact that the governing council decided to lower interest rates in may 2001 - i. e. at a time when consumer price inflation had just peaked and real growth rates for the previous few quarters were still robust. did this monetary policy strategy prove to be a success in the first five