Link to the monetary policy strategy  The first cornerstone of the our exit strategy is the link to our primary objective and thus to our monetary policy strategy. Evidently, the crisis has not changed the ECB’s primary objective. Our actions have resolutely been taken with this primary objective in mind: to maintain price stability in the euro area over the medium and longer term. By implication, any non-standard measure whose continuation would pose a threat to the achievement of price stability must be undone promptly and unequivocally. At the same time, if no such risk existed, a non-standard measure could be maintained in case we continue to see significantly abnormal tensions, credit dislocations and impairment of the monetary policy transmission mechanism. But financial institutions ultimately need to stand on their own two feet. Central banks can and have provided support to market functioning. But ultimately market activity relies on the confidence and trust of market participants themselves. 2. The design of the ECB’s measures  The ECB’s non-standard measures were designed with exit considerations in mind. There was a strong consensus to embark on such policies that would prove unproblematic to unwind at a later stage. In this sense, the design of the non-standard measures was chosen to facilitate a smooth exit, representing the second cornerstone to be kept in mind.
Although many ECB watchers at the time favoured holding or reducing rates, on the basis of subsequent events it is widely recognised that this decision was appropriate and served to anchor longer-term private inflation expectations securely. A second example that underscores the ability to take decisions in difficult circumstances is the rise in interest rates in July 2008. It is now often put aside because subsequent developments were overtaken by the eruption of the crisis, but there is no doubt that inflation expectations were rising noticeably at the time. The decision of the Governing Council at the time demonstrated its determination to continue solidly anchoring inflation expectations including in difficult circumstances. At the height of the financial crisis, this reputation has helped to stabilise inflation expectations, including contributing to guard the euro area against the materialisation of the risk of deflation. BIS Review 103/2009  7  IV. Concluding remarks  Allow me to conclude. This morning, I have outlined four main cornerstones of the exit strategy from our nonstandard monetary policy measures. They reflect: our reputation for swift and decisive action when it is required; our technical and institutional ability to act; the forward-looking initial design of the measures; and, above all, the link to our monetary policy strategy and the primary objective of securing price stability in the euro area over the medium and longer term. Stressing the importance of the exit strategy should not be confused with its implementation.