First, under forward guidance, its diffusion across the whole spectrum of term rates in the money market has been empowered. Monetary policy decisions are effective only to the extent that they affect interest rates at longer maturities, starting from those longer-term rates that banks determine in their interbank transactions. It is the expectations of future money market overnight rates that play a key benchmark role in setting the basis for the pricing of the entire spectrum of credit contracts in the broader economy. Our forward guidance has extended the horizon over which investors operating in the short end of the money market expect monetary policy to remain very accommodative – in tune with the fragile conditions of the economic recovery. This explains why the reduction in the rate on our main refinancing operations has determined a material shift in the entire term structure of money market rates. We trust these lower rates will be transmitted by banks and financial operators to the rates on mortgages and lines of credit for retail borrowers.
Under guidance communication, we have been expressing our conditional expectation that the policy rates will remain at current or even lower levels in the future for an extended period of time. At our last meeting in early November we activated the easing bias that was implicit in our previous guidance communication, and we reconfirmed the guidance and its easing bias moving forward. We still have not reached the effective lower bound. And we still have not exhausted our standard policy lever in conditions in which the risks that I have enumerated before could pose further threats to our price stability objective, and may thus call for more action.