Since the outset of the financial crisis in 2007, we had to adjust and expand our toolkit in order to be optimally equipped in serving our objective of price stability amid evolving challenges. The biggest challenge that we saw during the last year, I would summarize that with the term ‘fragmentation’. What is behind this?
Recall that our objective is to safeguard price stability for the euro area as a whole. However, fragmentation in financing conditions means that for two firms with the same credit risk, the financing conditions would depend on the area of residence. The same holds for private households.