In practice, access to information in most markets – including the credit market – usually differs between buyers and sellers. This is commonly referred to as information asymmetry and implies that the seller of a product knows more about it than the buyer does. A good example is the used car market. In the  6  BIS Review 153/2008  credit market it is commonly the borrower who knows more about his own situation than the lender does. One approach to dealing with this problem is to have a company’s creditworthiness assessed by an independent organisation. A credit rating can aid an investor because it would cost too much for the investor to analyse every company whose securities might be of interest. Moreover, market efficiency can be enhanced by businesses that are dependent on income from the market and therefore strive for a good reputation as providers of complete and correction information. Still, it is hard to ensure that the markets are liquid under every conceivable circumstance. If the participants suddenly become uncertain about asset values and if the counterparties are unfamiliar, a market can quickly become less liquid, which leads to high risk premiums. The current financial crisis has provided examples of this. Investors are averse to putting money into assets whose value is highly uncertain; they prefer the securities that are safest. Rather than doing business with unfamiliar counterparties, investors prefer counterparty risks that can be managed.
The Governing Council today also decided on further details of how the Eurosystem will buy assets with yields below the interest rate on the deposit facility under its public sector purchase programme. These decisions will be published in a separate press release at 15.30 CET. The monetary policy decisions taken in December 2016 have succeeded in preserving the very favourable financing conditions that are necessary to secure a sustained convergence of inflation rates towards levels below, but close to, 2% over the medium term. Borrowing conditions for firms and households continue to benefit from the pass-through of our measures. As expected, headline inflation has increased lately, largely owing to base effects in energy prices, but underlying inflation pressures remain subdued. The Governing Council will continue to look through changes in HICP inflation if judged to be transient and to have no implication for the medium-term outlook for price stability. A very substantial degree of monetary accommodation is needed for euro area inflation pressures to build up and support headline inflation in the medium term. If warranted to achieve its objective, the Governing Council will act by using all the instruments available within its mandate. In particular, if the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, we stand ready to increase our asset purchase programme in terms of size and/or duration. Let me now explain our assessment in greater detail, starting with the economic analysis.