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Condition currency field

so ladies and gentlemen the vice president and i are very pleased to welcome you to our press conference as a precaution and as he has done already in the past the vice president is joining remotely via audio today and uh i i just spoke to him so i know he's he's with us here so today is the first time in 2021 that we gather for the press conference and i would like to start by extending to all of you our best wishes for a happier a better and a healthier year in 2021. this is uh really the wish that i form for all of us we are clearly still affected by the coronavirus and its variants uh we are not holding a press conference uh together physically we are all distanced from each other and probably more so in some countries and i hope we all hope that it is going to change over the course of 2021 and on that page i would like to express on behalf of the ecb not only our warm wishes but also all our sympathy and our condolences to those who have suffered as a result of cavite 19 to those who have lost loved ones or whose loved ones loved ones are are still suffering from this this virus so we will now report on the outcome of today's meeting of the governing council which was also attended by vice president valdis dombrovsky the start of vaccination campaign across the euro area is an important milestone in the resolution of the ongoing health crisis nonetheless the pandemic continues to pose serious risks to public health and to the euro area and global economies the renewed surge in covid19 infections and the restrictive and prolonged containment measures imposed in many euro-area countries are disrupting economic activity activity in the manufacturing sector continues to hold up well but services sector activity is being severely curbed albeit to a lesser degree than during the first wave of the pandemic in early 2020 output is likely to have contracted in the fourth quarter of 2020 and the intensification of the pandemic poses some downside risks to the short-term economic outlook infras inflation remains very low in the context of weak demand and significant slack in labor and product markets overall the incoming data confirm our previous baseline assessment of a pronounced near-term impact of the pandemic on the economy and a pro protracted weakness in inflation in this environment ample monetary stimulus remains essential to preserve favorable financing conditions over the pandemic period for all sectors of the economy by helping to reduce uncertainty and bolster confidence this will encourage consumer spending and business investment underpinning economic activity and safeguarding medium-term price stability meanwhile uncertainty remains high including relating to the dynamics of the pandemic and the speed of vaccination campaigns we will also continue to monitor development in the exchange rate with regard to their possible implications for the medium-term inflation outlook we continue to stand ready to adjust all of our instruments as appropriate to ensure that inflation moves towards our aim in a sustained manner in line with our commitment to symmetry against this background we decided to reconfirm our very accommodative monetary policy stance first the governing council decided to keep the key ecb interest rates unchanged we expect them to remain at their present or lower levels until we have seen the inflation outlook robustly converged to a level sufficiently close to but below two percent within our projection horizon and such convergence has been consistently reflected in underlying inflation dynamics second we will continue our purchases under the pandemic emergency purchase program pep with a total envelope of one trillion eight hundred and fifty billion euros we will conduct net asset purchases under the pep until at least the end of march 2022 and in any case until the governing council judges that the coroner virus crisis phase is over the purchasers under the pep will be conducted to preserve favorable financing conditions over the pandemic programme period we will purchase flexibly according to market conditions and with the view to preventing a tightening of financing conditions that is inconsistent with countering the downward impact of the pandemic on the projected path of inflation in addition the flexibility of purchases over time across asset classes and among jurisdictions will continue to support the smooth transmission of monetary policy if favorable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase or rising of the pep the envelope need not be used in full equally the envelope can be recalibrated if required to maintain favorable financing conditions to help counter the negative pandemic shock to the path of inflation we will continue to reinvest the principal payments from maturing securities purchased under the pep until at least the end of 2023 in any case the future roll-off of the pep portfolio will be managed to avoid interference with the appropriate monetary policy stance third net purchases under our asset purchase program will continue at a monthly pace of 20 billion euros we continue to expect monthly net asset purchases under the app to run for as long as necessary to reinforce the accommodative impact of our policy rate and to end shortly before we start raising the key ecb interest rates we also intend to continue in reinvesting in full the principal payments from maturing securities purchased under the app for an extended period of time past the date when we start raising the key ecb interest rates and in any case for as long as necessary to maintain favorable liquidity conditions and an ample degree of monetary accommodation finally we will continue to provide ample liquidity through our refinancing operations in particular our third series of targeted longer-term refinancing operations remains an attractive source of funding for banks supporting bank lending to firms and households let me now explain our assessment in greater detail starting with the economic analysis following a sharp contraction in the first half of 2020 euro area real gdp rebounded strongly and rose by twelve point four percent quarter on quarter in the third quarter although remaining well below pre-pandemic levels incoming economic data surveys and high frequency indicators suggest that the resurgence of the pandemic and the associated intensification of containment measures have likely led to a decline in activity in the fourth quarter of 2020 and are also expected to weigh on activity in the first quarter of this year in sum this is broadly in line with the latest baseline of the december 2020 macroeconomic projections economic developments continue to be uneven across sectors with the services sector being more adversely affected by the new restrictions and social interaction and mobility than the industrial sector although fiscal policy measures are continuing to support households and firms consumers remain cautious in the light of the pandemic and its impact on employment and earnings moreover weaker corporate balance sheets and uncertainty about the economic outlook are still weighing on business investment looking ahead the rollout of vaccines which started in late december allows for greater confidence in the resolution of the health crisis however it will take time until widespread immunity is achieved and further adverse developments related to the pandemic cannot be ruled out over the medium term the recovery of the euro area economy should be supported by favorable financing conditions an expansionary fiscal stance and a recovery in demand as containment measures are lifted and uncertainty recedes overall the risks surrounding the euro area growth outlook remained tilted to the downside but less pronounced the news about the prospects for the global economy the agreement on future eu uk relations and the start of vaccination campaigns is encouraging but the ongoing pandemic and its implications for economic and financial conditions continue to be sources of downside risks euro area annual inflation remain unchanged at minus 0.3 in december on the basis of current energy price dynamics headline inflation is likely to increase in the coming months also supported by the end of the temporary vat reduction in germany however underlying price pressures are expected to remain subdued owing to weak demand notably in the tourism and travel related sectors as well as to low wage pressures and the appreciation of the euro exchange rate once the impact of the pandemic fades a recovery in demand supported by accommodative fiscal and monetary policies will put upward pressure on inflation over the medium term survey-based measures and market-based indicators of longer-term inflation expectations remain at low levels although market-based indicators of inflation expectations have increased slightly turning to the monetary analysis the annual growth rate of broad money m3 increased to 11 in november 2020 from 10.5 in october reflecting a continued increase in deposit holdings strong money growth continued to be supported by the ongoing asset purchases by the euro system which remain the largest source of money creation in the context of a still heightened preference for liquidity in the money holding sector and a low opportunity cost of holding the most liquid forms of money the narrow monetary aggregate m1 has remained the main contributor to broad money growth developments in loans to the private sector were characterized by moderate lending to non-financial corporations and resilient lending to households the monthly lending flow to non-financial corporations remained very modest in november continuing the pattern observed since the end of the summer at the same time the annual growth rate remained broadly unchanged at 6.9 percent still reflecting the very strong increase in lending in the first half of the year the annual growth rate of loans to households remained broadly stable at 3.1 percent in november amid a sizable positive monthly flow the new bank lending survey for the fourth quarter of 2020 reports a tightening of credit standards on loans to firms this tightening was mainly driven by heightened risk perceptions among banks in the context of continued uncertainty about the economic recovery and concerns about borrower credit worthiness surveyed bank also reported a fall in loan demand from firms in the fourth quarter the survey also indicated a further increase in net demand from households for loans for house purchase in the fourth quarter even though credit standards continued to tighten overall our policy measures together with the measures adopted by national governments and other european institutions remain essential to support bank lending conditions and access to financing in particular for those most affected by the pandemic to sum up a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed that an ample degree of monetary accommodation is necessary to support economic activity and the robust convergence of inflation to levels that are below but close to two percent over the medium term regarding fiscal policies an ambitious and coordinated fiscal stance remains critical in view of the sharp contraction in the euro-area economy to this end continued support from national fiscal policies is warranted given weak demand from firms and households relating to the worsening of the pandemic and the intensification of containment measures at the same time fiscal measures taken in response to the pandemic emergency should as much as possible remain targeted and temporary in nature the three safety nets endorsed by the european council for workers businesses and governments provide important funding support the governing council recognizes the key role of the next generation eu package and stresses the importance of it becoming operational without delay it calls on member states to accelerate the ratification process to finalize their recovery and resilience plans promptly and to deploy the funds for productive public spending accompanying but accompanied by productivity enhancing structural policies this would allow the next generation eu program to contribute to a faster stronger and more uniform recovery and would increase economic resilience and the growth potential of member states economies thereby supporting the effectiveness of monetary policy in the euro area such structural policies are particularly important in addressing long-standing structural and institutional weaknesses and in accelerating the green and digital transitions we are now ready to take uh your questions and i'm delighted to introduce our new director of communication uh who many of you know uh falcon prizel thank you madame lagarde and the first question goes to anita weisbach of cnbc i need to please thank you very much um president lagarde i have a question regarding the favorable favorable financing conditions and you've been um elaborating on a tightening of financial financial conditions um in your bank lending survey so how concerned are you about that tightening and if that fighting were to continue would that mean that the financing conditions are no longer favorable my second question is on the economy and the renewed lockdowns in major economies in the eurozone um whether this is affecting your economic outlook at all because it doesn't really seem to in your in your text and also how concerned are you about the creation of zombie companies in that context thank you well thank you so much and uh you actually give me a chance to reverse the order of your questions because i i would like to address the the second part of your question which had to do with the economic outlook because i think that it in a way determines uh what was decided uh today at our monetary policy governing council and when you know we look at the current economic situation we are clearly seeing uh mixed developments and those mixed developments apply to countries member states that have been affected in different ways and to different degrees by the pandemic so if i was to sort of put in two categories the developments that we are seeing you have the positive development and the not so positive developments and as part as the the positive uh i would certainly say number one the fact that uh the vaccination campaign has now started now albeit with some difficulty to begin with but it has now started we have two vaccines approved and probably a third one to come but that's a first positive i would say my second next positive is that an agreement was found between the eu and brexit and that clearly has to be taken into account given that our december projection which was predicated on the same basis as the european commission assumed that there would be no agreement and that it would be a wto blunt agreement third positive the fact that european leaders have now reached complete agreement and and removed the last hurdles to the next generation eu issuance at the eu level and that really provides uh some certainty as to the fiscal stimulus that will be coming in in the uh the months and years to come it's not completed and clearly the ratification process has to be completed for the own resources to be made available and to therefore permit the joint borrowing by the member states and then the rrp the recovery and resilience plans have to be submitted in due course as well but it's it's it's a positive uh that has now been confirmed i would list as part of the positives as well uh the fact that in the euro area uh manufacturing is clearly on a recovery path and when we look at the manufacturing pmi it's clearly in positive territory and finally particularly the day after the inauguration of the new us president the uncertainty that related to the election of the georgia senators that clearly had an impact on the majority in the senate was also removed so that that's that would be my category of the positives if i look now at the not so positive elements clearly the pandemic has worsened in many countries lockdown lockdowns have been tightened and for some of them extended and the new variants from the uk from south africa from brazil could require some more stringent uh measures going uh forward the incoming data suggests that activity likely declined in the fourth quarter 2020 which will have a bearing on the first quarter of 2021 and you know whether we look at mobility data whether we look at service pmi whether we look at retail sales those those are numbers that have declined in in the last quarter of 2020 in that context inflation numbers remain extremely weak we know that the december number is minus 0.3 we also expect that the early numbers in 2021 will turn most likely positive for mechanical reasons that have to do with the uh the german v.a.t rate that have to do with the energy prices but uh you know domestic pressure domestic prices uh will continue to be subdued owing to weak demand owing to a labor market slack and the euro exchange rate appreciation so that's that's the landscape against twitch we have decided you know to reconfirm the monetary policy decisions that was made in december and we do that against a projection which was announced in december which we will revisit for the next monetary policy meeting in march but which we consider as still broadly valid on the basis of the pluses and minuses that i have mentioned before but all of that is clearly tilted to the downside we still have a lot of uncertainty about you know the current pandemic about its development about the lockdown measures the containments they length and our our forecast our projection from december which we believe is still valid was predicated on lockdown measures continuing through the whole of the first quarter of 2021 and vaccination progressing very gradually so this these hypotheticals are are being confirmed by what we see at the moment but in the light of that uh what we have decided is to reconfirm our december uh monetary policy uh decisions and you know in doing so we we it's it's a steady um very focused and very attentive to all development um and and ready to adjust if necessary uh our pace of purchase i'll come to that in a second but also ready to adjust and use all the instruments that we have available in the toolbox so that's our a framework at the moment and i'll i'll now zoom uh into uh the question that you asked about favorable financing conditions because this is clearly um the the compass that we want to use that is clearly uh anchored onto an inflation and i'm just going to re-read for you because to me that's that's the the the key sentence if you will that some of you i'm sure i've identified we say purchases under the pep will be conducted to preserve favorable financing conditions over the pandemic period so over the pandemic period is at least until the end of march 2022 or any such time when the governing council considers that the pandemic is to continue and clearly that means that we will be present in the markets until the end of march 2022 at least the second sentence matters enormously as well it says we will purchase flexibly according to market conditions with a view to preventing a tightening of financing conditions that is inconsistent with countering the downward impact of the pandemic on the projected path of inflation so favorable financing conditions is the compass but the anchor is clearly the uh projected part of inflation and the necessity to counter the downward path the downward impact that pandemic has had on the inflation path so how do we how do we sort of identify whether or not we're in the presence of favorable financing conditions well i would say first of all that it is based on a holistic and multifaceted approach assessment and it is intended for all sectors so all sectors means household smes corporate sovereigns and we look at the financing conditions and as a result of that we look at the banking lending rates we look at the credit conditions we look at the yields yields on of corporate uh yields of sovereignty and and and it's it's this composite approach and this multiple indicators uh approach that we take into account to determine whether the financing conditions are favorable or not but don't forget that that favorability is is always assessed relative to inflation dynamics so we have to decide whether the financing conditions are appropriate to return inflation to its pre-pandemic path so those those are really i like to think in terms of this this this compass and the anchor and the two of them interact in order to assess whether or not we need to adjust and calibrate our purchases over any period because don't forget that pep as intended to preserve the financing conditions is earmarked by flexibility and that flexibility you've heard me say before its flexibility along time sequences flexibility in asset classes flexibility in countries and it has this dual function of stance and transmission as well so all that remains unchanged and the flexibility is still you know the one of the the key attributes of of of our pep thank you the next question goes to palace gurani of reuters palace please good afternoon thanks for taking my question uh madam president um coming back to this point about preserving the current financing conditions i'm curious about your commitment uh and how far it goes because you know italy went through some political drama last week but there was little to no market reaction which was quite surprising but this of course was self-inflicted it's a domestic issue and no connection to the pandemic so why is the ecb supporting a market in such a case and is this is consistent with the the parameters that you just said in the previous question my second question um relates to yield curve control uh pablo hernandez because the the president of the bank of spain said this is something that the ecb should consider what is your view of such a proposal and what is your reply to analyst commentary that in fact the ecb is already doing de facto yield curve control without saying so thank you thank you very much on you know let me just again restate what we are doing uh which by definition will tell you what we're not doing our aim is uh to preserve favorable financing conditions in the euro area and we want to do that because we believe that it will support consumer spending it will support investment spending and ultimately it will help achieve our mandate of price stability and as i said our assessment of favorable financing conditions is not um driven by any single indicator it is a holistic approach it takes into account multiple indicators and you know bank lending is one uh credit conditions is one uh corporate yields is one sovereign bond yields is one and and and it's by combining all of those that would we try to assess whether the financing conditions are favorable or not now obviously government bonds yields uh play an important benchmark role for the pricing of credit in the economy but at the moment we do not see that development in in any particular yields pose an issue for euro area-wide financing conditions and that really i think my my answer actually tackles you two questions uh we're not riveted to any particular yield we take into account multiple indicators that relate to the financing of the economy and and as i said we believe that financing conditions are currently broadly favorable on the basis of that multifaceted holistic assessment that we do of those very uh indicators that i have mentioned thank you the next question goes to christian beetle or frankfurter algebraic tyron christian please i have a question about this impossible to understand we can't people are a little worried about what will happen to them with the digital euro can you encourage them why is the digital euro good for people like you and me i'm very sorry but i we lost half of your questions so i know it relates to the euro and i know that it's about you and me but anything else was lost in the conversation so do you mind restating your question we couldn't hear it yes i try it many people are a little worried about what will happen to them with the digital euro can you encourage them why is the detriment euro good for people like you and me thank you you know the word i was missing in in in your question was digital which is clearly uh the critical one let me just preface what i will say now with the fact that if and when we have a digital euro we will nonetheless always have bank notes so i don't think that anybody should think in terms of banknotes and coins as opposed to and in substitution of uh digital euro so the two uh will will will coexist and will continue to do so if and when there is a digital euro and i just want to remind you where we are in that process we have launched a a consultation throughout europe on the 12th of october which expired on the 12th of january to which we had over 8 000 respondents responses by multiple respondents which uh have all addressed at least two of the questions that were included in the questionnaire so we have received a minefield of a mine of information which we are currently processing which will give rise to a report that will be shared that will be made public and available because we want that process to be totally transparent my colleague on the board fabio panetta has reported to the european parliament on that particular matter and he will report again i'm sure when we have conclusions from that report and it is only in the spring probably in april that we will determine whether or not we decide to go ahead with the work that will need to be done but there are lots of questions that have not been resolved and that will when they are resolved uh determine the shape uh the the the the the technology support uh the the uh process by which uh the uh digital euro uh will be uh created and i want to downplay any expectations that it is about to come uh it it will take a number of years it is a complicated uh issue it's one that has to be resolved without uh disrupting uh the uh the the current financial uh scene uh nor jeopardizing the uh the the monetary policy transmission that we have currently so and and we have not yet either decided what the technology backbone would be ideally in order to support that digital euro but i would simply observe in response to your question that a digital currency where it has been piloted and there is only one which is clearly now launched in in a very small country but it is piloted on a fairly large scale in in china is of use and of service to all citizens so it is not something that is good for the elite or is good for the young or is good for some versus others if it is well done and if it is well implemented it would be of service to all citizens but clearly we're not there there are lots of issues that need to be addressed we need to make sure that that is compatible with monetary policy uh with sovereignty with proper transmission of monetary policy so it it's clearly uh a project that is fascinating for some that corresponds to a demand from citizens i'll remind you that there are several countries including for instance sweden outside the euro area granted or the netherlands where the use of a tangible currency is declining at a very very fast pace and that has been as so many other things that has been accelerated by the the pandemic thank you the next question goes to carolyn look of bloomberg news carolyn please hi thank you very much um president regard as you mentioned in your introductory statement just now the latest bank lending survey suggested that credit standards tightened for loans to enterprises and households now we're seeing that we have these extended lockdowns and a very slow start to vaccinations and the key risk for the euro area is actually a wave of defaults hitting banks so how is the ecb thinking about this with regard to the effectiveness of its cultural program given that these are supposed to encourage banks to lend and at the same time that lending can expose them to bigger risks and secondly the account from your last meeting also showed that some reservations were expressed about how much the cultural borrowing allowance should be increased so can you give us an idea of what the governing council's latest thinking is on what limitations exist as to how much policy can or should be eased via tel tros and whether there's any concerns about being seen as excessively subsidizing the banking system uh thank you for your question on onteltra essentially let me remind you what what uh what teltro uh is tell to telltrow iii is is intended for it is intended to continue to support the financing of the economy and the fueling of credit throughout all segments of the economy and in particular of course the uh the the non-financial corporate sector but it includes also um you know multiple uh segments of of lending so um it was constructed with a view to making financing available at sufficiently attractive uh conditions that banks would be actually encouraged to respond to the demand that they would be getting from the uh from the their clients essentially and when you look at the numbers of the uh the second quarter and particularly the second teltro three and the take-up that we had at that time which exceeded by far all the uh the expectations and even the following telltroll that was also in excess of what the the forecast expected it is clear that it has encouraged uh lending by banks and when they are consulted actually when you look at the bla the bank lending survey this one and the previous one all banks actually say well all banks those that are surveyed actually say generally that teltro has actually helped them and encouraged them to to provide lending to the economy now clearly at the same time banks have to be mindful of the economic circumstances banks have to be mindful of the particular situation of their respective clients they have to appreciate what kind of moratoria will apply what kind of guarantees they will be and they need to do their risk assessment as they were reminded by the supervisory side of the ecb most recently so it's with that background that lending is available but clearly to be used um under the responsibility of the banks that have to continue to do their proper risk assessment in view of the financial stability risks that are out there now we had a good discussion about the uh the the the expansion and extension if you will of tel tro at our december meeting and we came to the conclusion that it should be extended over time that we should have three new uh issuance and that the volume that banks could be allowed to borrow against would be moved from 50 to 55 and that that's that's how we are proceeding we are reconfirming those decisions and we continue to remain obviously very attentive to the actual uh lending we observe by the way that uh the lending rates are at uh lowest levels they've ever been or pretty much uh that 1.5 percent for corporates 1.35 for households it's it's really favorable financing conditions by all by all accounts and certainly teltro has contributed to that as well thank you the next question goes to martin allen of the financial times martin please martin are you connected yes i am i hope so yes you are we hear you can you hear me yes madame lagarde two questions quickly for you one is on fiscal policy the u.s looks likely to launch a major stimulus and uh president biden but as things stand most eurozone countries are planning to reduce their fiscal stimulus this year do you think they need to do more second question you've given us a little bit more of um of a feel for what you mean by favorable financing conditions but do you think you need to define that more clearly your reaction function just as the previous ecb president mario draghi did in in his amsterdam speech in 2014 and actually um outline exactly how you would react under different circumstances um thank you very much thank you so much uh for your question concerning the um the the fiscal um stimulus i would observe that um both from a monetary point of view and from a fiscal point of view it is necessary to continue to be accommodative the situation is sufficiently uncertain that fiscal need to be continued at the national and at the european level um for the for the for the region to defeat the pandemic would be nice but certainly to counter uh the the downward impact of the of the pandemic on the growth of the economy obviously on prices and inflation so we believe that fiscal has to be uh continued uh the probably um slight qualification that we would have which i think is also in the introductory statement is that we certainly recommend that it be made as as targeted as possible and and and temporary given that we all hope that uh thanks to those combined policies we will see recovery uh during the course of 2021 probably second half more than more than first half and then and then continuing throughout 2022 but fiscal fiscal policy has to continue being supportive of of the economies let me also observe that uh combining the national efforts that have been undertaken um both in terms of discretionary additional fiscal support and in terms of guarantees which if you know put together are in the range of 24 roughly of of gdp if you combine that plus the threefold uh package that was approved initially in april uh of you know the sure program the esm program and the eib additional guarantee program for a total of 540 billion euros and the combination of the recovery and resilience fund and and the mmf the um the multi-annual budget you arrive at at the global package which is significant and your question actually uh prompts me to once again reiterate the fact that it needs to be rolled out it has not been decided it has been an extraordinary breakthrough for the europeans at large that there is this joint borrowing but it needs to be rolled out promptly and hopefully we will see the disbursement in the course of 21 in order to support some of the commitments that are made and some of the identified investments that are proposed by the countries so it's a question of the ratification process for the own resources and the question of the recovery and resilience plans which have to be submitted as well but on the fiscal front i think that nationally and regionally there is that joint effort which is significant which is there for which there is a political will of 27 countries which is always a bit of a challenge as opposed to when you have one fiscal authority and one single country as is the case in the us and on that page i would really want to take this opportunity to wish my my colleague and friend janet yellen the very best in her endeavor to lead the u.s economy in the way that she only can do it um inclusively and and very smartly um your second question had to do with i forgot now because i got carried away with this fiscal uh aspect oh yeah it was you wanted to know whether i would deliver a speech in amsterdam to describe precisely with great a great level of details uh what we mean by favorable financing conditions i have no plans scheduled for the moment but it is pretty obvious that we understand what the general principles of the determination of favorability of financing conditions are and i have indicated the reference to holistic multiple indicators all sectors and the key anchoring of my favorable financing conditions compass onto inflation and how it can be used in order to counter the negative impact that pandemic has had on our inflation path so it's it's pretty pretty clear what we want to achieve and how we will define those uh finance favorable financing conditions but we will we will be we will be assessing that on a regular basis and uh clearly there will be uh there will be yet another assessment uh that will take place in march and obviously at the time when new projections will be available so the anchor of inflation and and how it impacts on the compass of the financing conditions will be even more explicit thank you next question goes to isabella buffake of ilsol eventually yes hello thank you very much for the opportunity president lagarde i have two questions the first question is on the path envelope instrument you clear that the envelope is not to be used in full but it can also be recalibrated now the fact that it cannot be used in full comes first and i don't know i see maybe a sign a bit hawkish i could be mistaken but can you specify why you um included this sentence on the envelope and i have also a second question on preserving the favorable financing conditions and if this is on the banks and on the fragmentation that there can be this year with the rise of non-performing loans how the governing council is concerned about it if it is concerned about fragmentation thank you well thank you thank you very much i'm going to go back to that same sentence which uh you know it's uh as you can imagine it has been very carefully drafted and elaborated and there's one word that i would uh call your attention to and it is the word equally so that sentence which is following the one that i read earlier so i will not impose yet another reading although i love to read but this one says if favorable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope of the net purchase horizon of the pep comma the envelope need not be used in full full stop and that word is important equally so what we signal with equally is it's a balancing act if and i'll read the sentence equally the envelope can be recalibrated if required to maintain favorable financing conditions to help counter the negative pandemic shock to the path of inflation so i think it goes it i don't need to re-explain yet again uh as i said our compass the driving force is the favorable financing conditions the anchor is the countering the downward impact on inflation on our inflation path the downward impact of the pandemic on inflation path and if we determine that the financing conditions are favorable then we are just if on the other hand favor favorable financing conditions cannot be preserved as the pace of purchase has been decided we will adjust upward and if the envelope is not sufficient then we will recalibrate the entire envelope so i can't be clearer than that it's really identified with with a very high degree of flexibility and the capacity to adjust because we are prepared to adjust all our instruments not just the pace of purchase we're prepared to adjust all instruments nothing is off the table nothing is off the table you had a second question which i've lost now here we go bank fragmentation um you know our mandate is price stability in the euro area so when you when i hear the word fragmentation i think about monetary transmission throughout the whole of the euro area throughout the member states and that is a driving that is also a key function it's one of the two functions of pep in particular under the extraordinary circumstances that we are going through non-performing loans this is a matter that clearly uh belongs to the supervisory um arm of the ecb and as you know andrea andrea has been very explicit about non-performing loans he's been very explicit about about what the banks should do in order to recognize non-performing loans he's been very explicit as well about the asset management companies or company whether it's a combination of national levels and holding at the european level or a european entity and i will not venture in that particular field because it belongs to the supervisory side and as you know we have a division of labor here at the ecb thank you the next question goes to andres schlumpf of expansion in spain andres please good afternoon madame lagarde i wanted to know if you see the strengthening of the euro more or less of a threat that it was in on december and a second question i was wondering if you could give market participants any advice on how to know whether the ecp is going to use the full pep envelope or not as it as i see this holistic and multi approach a bit confusing thank you very much well i'm really sorry that you see it as confusing because it's not intended to be confusing so let me restate again we have an envelope of 1 trillion 850 billion euros that is available that can be used flexibly depending on whether or not we reach our objective of preserving favorable financing conditions if we don't need to use the whole envelope because the financing conditions will have remained favorable nonetheless we will not use the entire envelope if on the other hand we need more than the envelope because the favorable finance because the financing conditions have not been uh favorable and preserved as such then the envelope will be reconsidered and recalibrated so flexibility is the key word the other point that i made earlier on is that we have not only expanded pep back in december we have extended pep over the course of time so until march 2022 you can expect the ecb to be present in the market and you know it is not going to be linear it is not going to be a fixed amount so yes we will have to look carefully at the financing conditions and those people in the market understand as well when and how financing conditions can evolve and change so it's it's fairly uh it's not as simplistic as the linear fixed amount but it's also uh driven by the fact that we want to be able to maintain fine favorable financing conditions because this we believe that this will actually induce consumers to spend investors to invest and ultimately economy to fare better and inflation to go up towards our aim therefore helping us deliver on our mandate of price stability so i hope to have clarified a little bit for you uh what you felt uh was confusing and to have i hope to have removed a bit of that confusion on the um on the strength of the euro let me let me just tell you that we are monitoring very carefully exchange rates very carefully because we know that exchange rate have an impact on prices and and clearly play a part in our inflation forecast and what we can deliver with our monetary policy so we are very attentive and as i said earlier on all instruments can be adjusted and nothing is off the table thank you and the last question goes to tom fairless of the wall street journal tom please hi thanks very much for taking the question president the guard um the first the first question was on the um how you see the outlook for the first quarter of this year are you currently given the the social restrictions it seems quite clear are gonna last until uh easter in a lot of countries are you expecting a uh contraction i mean how big do you expect the impact of these social restrictions to be the second question i'm sorry to suppress this point again but i it was about the this 1.85 trillion um and you know the fact that you said in the opening statement i i see that it's an even-handed statement but the fact that you mentioned specifically that you might not use it or suggest there was some kind of discussion about that um i mean was there a feeling within the governing council that you were tilting one way or the other that actually you might not need to to use the whole package because you're cautiously optimistic for instance thank you well thank you um i wish i was cautiously optimistic uh i think i'm now getting old enough to uh to be realistic and and to observe the development of a situation which is really hard to predict and really hard to forecast i think what we are what we are uh observing uh on a preliminary basis because this will really be the the subject of our march uh next monetary policy uh governing council meeting but what we're observing is a decline uh in in growth in q4 and as we all know when you have a decline in q4 when you have negative numbers negative numbers we will see but decline in q4 will uh travel into q1 and will also impact uh the uh the the economic outcome for q1 added to which as you said there are more containment measures there are uh in in intensification of lockdowns now lucky or not but we had anticipated the continuation and the uh the the lockdown measures that are currently in place not to the curfew hour uh if you will but but certainly it was included in our in our forecast and and that leads us to conclude that our forecast uh for 2021 around four percent 3.9 if i recall is still broadly valid at this point in time but short-term risk tilted to the downside as well no question about it uncertainty in the air so we shall see but we don't have enough uh clear hard numbers yet uh to revise uh in any in any in any way all i can tell you is that our forecast for 2021 is still holding as we speak um you know i i hate to read yet again so i won't do it fear of being accused of reading so much but as as we have discussed in december we have expanded the volume of pep from uh 1.3 to 1.850 we have extended the duration because we believe that because of the contagion current developments because of the containment measures we believe that an extended period of time is warranted and we have associated those two measures expansion and extension with a variable which is favorable financing conditions this is what we strongly believe in and we have hope that favorable financing conditions will continue and will be sustainable uh going forward but we have to be prepared for all options as a result of which we have identified that envelope which is either not going to have to be used if we meet the requirement of the favorable financing conditions or which will have to be increased recalibrated if more is needed in order to respond to this expectation of the favorable financing conditions i can't tell you more than that it's it's a package it came together uh with tel trus which was also increased in in volumes and extended over time it's it comes on the back of a very of very low uh interest rates so it's it's a whole package which if coupled with our forward guidance which is also very explicit forms our monetary policy at this point in time thank you i think that concludes our press conference see you around next time thank you very much thank you all the best to you and look after yourself you