Working on the basis of such dual approach is particularly appropriate in the current world of significant uncertainties, which requires a steady but creative hand from the makers of monetary policy. From this point of departure, today, let me focus on the challenges of monetary policy normalisation and framework over the medium term. The ECB monetary policy and gradualism Slide 2.
As a result of the massive collateralized securities they held, financial institutions registered mounting unrealized losses which actually involved no cash flow under the fair value rule. Though these losses were only meaningful in accounting, such astronomical book losses distorted investors' expectations and formed a vicious cycle of prices tumbling – asset writedown “panic selling” further prices slumps.