In particular, since the outbreak of the turmoil in August 2007 the Eurosystem has adjusted the distribution of euro liquidity supplied over the course of the maintenance period by frontloading the supply of liquidity at the beginning of the period and reducing it later in the maintenance period.
I now turn to the consequences of these unusually low real interest rates for broader financial market conditions. My main point is that unusually low real interest rates are likely to be associated with other unusual financial market outcomes. I’ll discuss three of these outcomes in some detail: inflated asset prices, unusually volatile asset returns and high merger activity.