In particular, ECB policy decisions over the past five years were dictated by the inflation outlook for the euro area, in line with past historical regularities in our interest rate settings.7 The euro area average, however, is neither representative of the conditions prevailing in all Member States, nor of the distribution of funding costs across borrowers within countries.
Especially since the outbreak of the sovereign debt crisis, borrowing costs for private lenders have become increasingly heterogeneous across countries and sectors. Profitable firms located in stressed euro area economies have faced increasing funding costs as the sovereign debt crisis has escalated, with small and medium-sized firms hit harder.