The unconventional measures we have adopted include, most recently, the Targeted LongTerm Refinancing Operations and our expanded Asset Purchase Programme. These measures support demand through several transmission channels, but crucially they have helped unclog the bank lending channel of monetary policy, thereby producing a virtuous circle between credit supply and demand which lends momentum to the recovery.
In particular, the incentives embedded in the TLTRO have led banks to compete more for credit to support growth, by cutting margins and lending rates. Lower rates have in turn created higher net demand for borrowing, allowing banks to expand their overall lending volumes and keep interest income on a rising path.