♪ >> there is the possibility for the first time in a long time of more people falling back into poverty. >> we've been through a very disinflationary shock during >> all of the telltale signs of a structural bull market at play. >> this will be an excellent year for growth. >> i do not see the fullness of what the administration will do for the economy. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz.

on radio and television worldwide. a simulcast. the first full day per president biden. the extraordinary pageantry we saw yesterday. let music last night i slept through. jonathan ferro transfixed by what bruce springsteen did last week at the lincoln memorial. your thoughts as a foreign guy on what you observed yesterday in washington. jonathan: it is back to normal. back to the conventional approach to making policy, and in many ways what we expected. the volume might turn down a little bit. we experience to that in the first briefing yesterday evening. what does normal achieve? normal was not good enough four years ago when americans went to the polls. they want to see real change. for that reason, this administration has to hit the ground running. they are trying already. joe biden has talked about a bipartisan approach to fiscal stimulus, talked about unity.

we will see how easy that will be. i think most people think that will be difficult. the fact that senator romney came out and talked about how he would not be going to what is on the table speaks volumes. tom: some of the energy, the tomb of the unknown soldiers and the three former president and up at arlington in casual conversation. there was symbolism. what do you look for into the end of january? lisa: jonathan raises a big point. the message of unity broke down quickly as we assess the landscape politically and economically. what i'm looking at is not only the vaccine schedule, how will be be able to get the economy back online what is so difficult to assess risk in pain. we were getting the jobless claims in half an hour. we are expecting an ongoing deterioration in the jobs market. these are issues, and there massive ones facing the biden

administration. the pageantry great, very short-lived. tom: this is so important. you mentioned earlier. the american labor economy. all of this is buttressed against the pandemic and the jobs report that was pretty grim. jonathan: a negative print and a market that continues to look through it. at some point we have to move away from the aggregate numbers because this administration will be focused on redistribution and increasing inequality, the gap between the haves and have nots between this pandemic. the first fiscal package will go some way towards alleviating that. that is not where it will stop. that is when it gets on the markets radar. this market, market participants , markets are not meant to have any real moral compass to take in the inequality around us because what matters is the aggregate numbers.

it looks like the aggregate numbers will improve in the year to come. when redistribution gets on the radar can a much bigger fashion with his administration, that is when it comes on the radar with this market. when you start thinking about the high corporate tax rates, higher tax rates at the state level, not just the federal level, that is when it gets on the markets radar more. i do not think it is right now. i think it will be. tom: thrilled you're with us on radio and tv. dow futures up 57. rates 1.09 on the 10 year yield. the dollar weaker. we are watching euro-sterling as well. the other thing we are watching is bitcoin. erik nielsen of unicredit is scathing on bitcoin, and particularly across europe. here is the professor from harvard, the bravest book on

economics, "the curse of cash," on bitcoin. ken: the governments are not going to allow suit anonymous transactions on a big scale, they will just not allow it. the regulations will come in, the government will win. it does not matter what the technology is. i think over the long run if there is not a use, the bubble will burst. tom: hugely influential voice, rogoff of harvard. i want to know what the united kingdom is waiting for. the u.s. likes to say it is internationalist. do you look for regulation out of the united kingdom on bitcoin? jonathan: i think increasingly we will see regulation. to ken rogoff's point, government want someone else and control of the currency.

the reason people consider this not a currency is you cannot pay your taxes with it. that is what money is all about. can you pay your taxes with it? that is all that matters to governments. they do not want you traded in the currency that they cannot take on to pay your taxes. that is what matters to governments. they will be cracking down hard. tom: thank you for the pro and anti-bitcoin discussion across our various twitter accounts and email and hate mail. speaking of hate mail, he loved to send me hate mail, michael holland. he has paid a lot of taxes on capital gains over the year. what you do with a stop that is a melt up and you have a tax obligation do? how do you handle that? michael: one of the things you can do is choose your favorite university, we have the lafayette endowment a few weeks

ago, give the stock of choice to financial aid for students. you get the tax write off and help education and the equalization of opportunity jonathan ferro was just talking about. lisa: i will let you worry with how to deal with the tax bill. there is a question of how to deal with risk and assess it. i was struck by seth foreman who wrote a note obtained by the financial times. so much stimulus being deployed try to figure out if the economy is in recession is like trying to assess if you had a fever after you just took a large dose of aspirin. he likened the current situation to investors being frogs boiled in water, slowly becoming desensitized to risk. how do you navigate as an investor? michael: seth harmon has been brilliantly investing for decades and i would never ignore what he is saying. right now i am mindful of where the market psyche is, with janet yellen pairing up with jerome

powell, i think they are a panacea for people concerned about an overvalued market, that the market could become even more overvalued. the trick will be a year from now, that the economy has fulfilled some of the heightened expectations about when the vaccine gets out. it was interesting to see a bloomberg blurb about amazon now moving into help out with the distribution of the vaccine. i think we could get positive surprises rather than negative surprises over the next couple of quarters in the vaccine front. if that happens i think some of the animal spirits in the economy may start to waking up. jonathan: forgive me for being so cynical, but you think big tech sees the writing on the wall? wise amazon waiting so long to talk about this, why did twitter wait so long to band donald trump? it seems convenient this has

happened in the month the incoming administration is coming through. michael: i think your cynicism is well-placed. the people who run these companies have seen where we are going and i think it was more the netflix yesterday, stocks like amazon cloud to the upside dramatically. there is a new sheriff. tech companies will have some comeuppance over the next year but i think things will probably be ok. lisa: given your role at state street and some of the biggest asset managers over the years, seeing the transformation in that industry, what are you expecting in the years ahead under the joe biden administration when it comes to consolidation and asset management into the hands of a few behemoths? michael: i think as long as the

behemoths behave themselves, it is difficult to make a serious political headway in terms of attacking them. what happened over the last decade and the last few years is a dramatic favorable position for the people listening to the call, watching the call. they do not pay much to have their money taken care of. the fees cascade down. a very favorable development. the behemoths come if they do not manage it right, and we just had jonathan talk about how the techs are trying to manage in a new environment, i think the big people like state street and vanguard and fidelity will do the same thing. smart people are running these places, and as long as they keep making it better for all of us who are investors they reduce the possibility of draconian things happening to them. jonathan: great to catch up as

always. a real gentleman of wall street. michael holland. thank you very much. equity futures at 3853 on the s&p 500. a record high in yesterday's session. talk about central banks. you mentioned that piece. can you mention what the beds would've looked like if the central but asked what the -- what the op-eds would look like if the central banks had not stepped in? lisa: the central issue is how much our central banks covering for fiscal policy. how much -- i think that is where the key debate is right now. jonathan: i think there providing accommodation for fiscal policy makers. president lagarde has been open about that. we will hear from her in about 20 minutes on bloomberg. you are to "bloomberg surveillance." alongside tom keene and lisa

abramowicz, i'm jonathan ferro. record highs in the equity market. judging by the commentary, record highs in a tough time for society and the global economy. this is bloomberg. karina: president biden plans to issue a set of executive orders fighting the coronavirus. those orders will reverse or refashion many of donald trump's most criticized policies. the president will overhaul and unify the approach to virus testing and use federal power to stabilize the supply chain for metals coal supplies -- for critical medical supplies. meanwhile, the biden administration -- infectious diseases chief anthony of algae pledge the countries -- anthony fauci pledged commitment to the agency -- donald trump had said

the u.s. would exit the who. the u.k. has suffered its worst day yet in the pandemic. more than 1800 deaths reported in a 24 hour period. prime minister boris johnson advisor worn to some hospitals look like war zones. almost 40,000 patients are being treated in british hospitals. avril haines will be the first woman to oversee american spies. she also became the first member of biden's cabinet to win senate approval. the vote came just hours after biden was sworn in. as director of national intelligence, she would ever see 18 intelligence agencies. united airlines is mapping out recovery plan. united says this year will serve as a transition after the collapse and travel demand due to the virus. united says it is more than halfway to finding $2 billion in

cost cuts. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am karina mitchell. this is bloomberg. ♪ - [announcer] imagine having fuller, thicker, more voluminous hair instantly. all it takes is just one session at hairclub. introducing xtrands. xtrands adds hundreds or even thousands of hair strands to your existing hair at the root. they're personalized to match your own natural hair color and texture, so they'll blend right in for a natural, effortless look. call in the next five minutes and when you buy 500 strands, you get 500 strands free. call right now. (upbeat music)

>> a great experiment takes great determination. the will to do the work, and

then the wisdom to keep refining what president joe biden has called upon us to summon now. the courage to see beyond crisis , to believe in ourselves, believe in our country, believe in what we can do together. president biden: we have learned democracy is precious. because of you democracy has prevailed. america's story depends not on any one of us, not on some of us, but on all of us. on we the people. jonathan: joe biden and kamala harris making history in washington, d.c. sworn in as the president and vice president of the united states of america. alongside tom keene and lisa abramowicz, i'm jonathan ferro. record highs in the equity market and the united states and worldwide. going into the equity futures, up eight. we advance .2% on the s&p 500.

in the bond market across the treasury curve, yields higher, the curve steeper. up two basis points to 1.1%. on 30, up two basis points. tom talked about it through much of this morning. a weaker dollar. euro-dollar out another .4%. the news conference and the data 11 minutes away. tom: i wonder whether christine lagarde will actually address bitcoin? right now an important conversation. we are try to get a sense of history. for too many of us history goes back five years, maybe eight years, maybe 12 years ago. julie norman is in london and has a real grasp of the history of this nation at the time of major votes. good morning. i want to take you back to the enormous shift bill clinton inflicted in 1996 on welfare

reform. gephardt voted against his president, tom daschle voted against his president, and on and on. are we setting ourselves up for a biden that will look like clinton of 1996? julie: i think this will look different than the clinton years. clinton was such a different kind of politician then biden is. his experience was so much different. clinton was from a different kind of position. starting from centrists positions. biden will be a moderate. he will struggle to date many of the progressives of his party going along -- he will struggle to keep many of the progressives of his party going along with everything he wants to do, but he is very experienced with getting legislation through and working across his own party as we saw during the campaign. tom: is president biden going to

say there is much in this bill i do not like but we need to get it through on a bipartisan basis? is he going to pull away from the left and go for action as clinton did in 1996? julie: i think we will see those kinds of moves from biden. he has someone who is going to be beholden to the party on legislation that matters to him. we have seen that in some of the moves he has made. he has not made himself a puppet of the left or anything like that. he knows what his agenda is. he has come out with a bold plan that will not pass in its current form, but one where there is room for maneuvering across the aisle within his own party. he is going to go for what he wants. he will not be swung by the tides around him. lisa: in the meantime he is looking at the here and now, planning to assign an additional number of executive orders after

assigning at least 15 yesterday, including rejoining the who, rejoining covax. how important are these measures? are these for the visuals or do they have significant effects that take place in the near term? julie: i think it is a bit of both. the executive orders and directives joe biden is coming out with this week touch on a number of different issues, not only the coronavirus and the economy but also climate change, immigration, next week looking to erase equities. these are all issues that actually matter. it is also signaling what the priorities of this administration are going to be and where we can expect more in-depth legislation down the pipe. lisa: how much will an ongoing impeachment trial in the senate and the next week or two model the message of priority -- muddle the message of priority?

julie: this is the big question. it is unclear if or when this will happen. joe biden wanted to get down to business and did not want his agenda modeled by the trial -- muddied by the trial. we know joe biden has been trying to get the senate to agree to bifurcate business, half a day on the trial and half a day on business. whatever happens it will be disruptive and tough for his agenda. tom: i need an update on the special relationship. we had the idea of trump and johnson with equivalent haircuts. we cannot go with that this time around. what is the special relationship going to look like? julie: it will be interesting to see how it plays out. right now the u.k. is trying to position itself as a strong partner, even counter to the eu i think the eu recent investment

agreement with china is making the u.k. trying to promote themselves as a better ally for biden and his approach to china, as well as another key issues they have always shared. security, climate change, and what winds up being the big conversation, the u.s.-u.k. trade deal, which will not be as much of a priority for biden as it is for johnson. jonathan: great to have you with us on the program. professor of university college of london, julie norman. climate change has been the big push from the boris johnson government to try to build a bridge with the incoming joe biden administration. no idea how effective it will be, but that has been the idea out of the british government. jonathan: well said -- tom: well said. feathers ruffled in ottawa on climate change, one of the first actions to update our allies is on the keystone pipeline. no question the debate occurred

and mr. bided acted rapidly. jonathan: that is the story coming out of d.c. let's talk about the story out of the u.s. economy. in about five minutes we have to turn our attention to jobless claims in america. unbelievable to still see a number close to one million. that speaks to the amount of churn in this labor market that continues. tom: i will do the math and we will see it with the job report. the january report in february. with the way the curves are happening, i will not mince words, there is no vector, there is a real stasis at 900,000. jonathan: we will break down the numbers with michael mckee in about five minutes and then we will get you to frankfurt, germany for the opening of the european central bank news conference with christine lagarde. many of the trouble she faces out of her hands. what can she do about it?

it is a vaccination effort stumbling out of the gate in germany and across europe. it is acquiring vaccines where europe has had difficulty relative to the u.k. we will talk about all of that on bloomberg tv and radio. alongside tom ke so you're a small business, or a big one. you were thriving, but then... oh. ah. okay. plan, pivot. how do you bounce back? you don't, you bounce forward, with serious and reliable internet. powered by the largest gig speed network in america. but is it secure? sure it's secure. and even if the power goes down, your connection doesn't. so how do i do this? you don't do this. we do this, together. bounce forward, with comcast business.

jonathan: from new york city, good morning. alongside tom keene and lisa abramowicz, i'm jonathan ferro. in just a moment in frankfurt, germany, we will bring you a news conference with christine lagarde. now we will go to the u.s. we will do that with michael mckee. michael: we have the numbers out now. there are a lot of numbers. we will start with jobless claims, they have been most important to the markets. 900,000, still elevated, but lower than the forecast for 935,000. and this is probably the first week that's not completely distorted by holidays, so it is a relatively clean read. and it shows that we are still seeing a lot of layoffs.

we had the caveat of how many people may be fraudulently claiming commendable claiming, but 900,000 is still a lot. it adds urgency to the joe biden effort to try to keep the economy going at this point. the other big number of the day, housing starts at 1,000,606 9000 at an annual rate, much better than the forecast of 1.5 6 million. and so it does suggest that the housing industry remains on fire, 5.8% gain. building permits at 1.70 9 million. that is an increase of 4.5%. it suggests strength in the housing market. mortgage rates are low. the interest rate sensitive sectors of the economy are responding. the other number out this hour, the philadelphia fed with a big increase -- this could be the

one that the markets react to the most -- 26.5. the last month it was revised to 9.1. that's a major increase in the philadelphia fed index. the new orders index at 30 versus 1.9. the employment index rising. so you have the reflection of an economy still shedding jobs and jobless claims, but the fillet of your fed index -- but the philadelphia fed index suggests there is some come back out there. tom: i know that jon can parse what is in europe compared to what we see with michael mckee. i take your point on this, the philadelphia fed idea. describe why guys like me turn to the philadelphia fed versus all the other stuff. michael: it is a contemporary news index, a sentiment index, purchasing managers in the philadelphia federal reserve

district, like new jersey, philadelphia and delaware. it shows increased confidence. the interesting thing is that it is just not manufacturers, they include service industries there. so it is good news to see it rebound in that way. i have not looked through all of the report on why they are seeing the rebound, but there is a rebound there. jonathan: thank you. that is a wrap up of the economic data. we will turn to frankfurt now to listen in to christine lagarde. ms. lagarde: the previous baseline assessment of a pronounced near-term impact of the pandemic on the economy, and a protracted weakness in inflation. in this environment, ample monetary stimulus remains essential to preserve favorable financing conditions over the pandemic period for all sectors of the economy.

by helping to reduce uncertainty, and bolster confidence, this will encourage consumer spending and business investment, opening economic activity and safeguarding medium-term price stability. meanwhile, uncertainty remains high, including relating to the dynamics of the pandemic and the speed of vaccination campaigns. we will also continue to monitor development in the exchange rate with regard to the possible implications for the medium-term inflation outlook. we continue to stand ready to adjust. all of our instruments, as appropriate, to ensure that inflation moves forward with our aim in line with our commitments to symmetry. against this background, we decided to reconfirm our

accommodative monetary stance. first, the governing council decided to keep the key interest rates unchanged. we expect them to remain at their present or lower levels until we have seen the inflation outlook robustly converged to a level close to but below 2%. and such convergence has been consistently reflected in underlying inflation dynamics. second, we will continue our purchases under the pandemic emergency purchase program, with a total envelope of 1,850,000,000,000 euros. we will conduct purchases until at least at the end of march 2022, and in any case, until the governing council judges at the coronavirus crisis phase is

over. the purchases will be conducted to preserve favorable financing conditions over the pandemic program -- period. we will purchase according to market conditions, and with the view to preventing tightening conditions that are inconsistent with countering the downward impact of the pandemic on the projected part of inflation. in addition, the flexibility of purchases over time, across asset classes and among jurisdictions, will continue to support the smooth transition of monetary policy. if favorable financing conditions can be maintained it asset purchase flows that do not exhaust of the envelope over the net purchase horizon of the pack, the envelope may not be

used in full. equally, the envelope can be recalibrated, if required, to maintain favorable financing conditions to help counter the negative pandemic shot to the part of inflation. we will continue to reinvest the principal payments from maturing securities purchased until at least the end of 2023. the future rolloff of the portfolio will be managed to avoid interference with the appropriate monetary policy sums. third, net purchases, and the asset purchase program, will continue at the monthly piece o f -- pace of 20 billion euros. we expect monthly purchases under the app to run for as well as necessary, to reinforce the

accommodative impact of our policy rate and to end shortly before we start reusing the key ecb interest rates. we also intend to continue in reinvesting in full the principle payments from securities purchased for an extended time, past the date when we start raising the key interest rates, and in any case, for as long as necessary to maintain favorable liquidity conditions and a degree of accommodation. finally, we will continue to provide ample liquidity through our financing operations, in particular our third series of targeted longer-term refinancing operations remains an attractive source of funding for banks, supporting lending to firms and households. let me explain our assessment in

greater detail now, starting with the economic analysis. following a sharp contraction in the first half of 2020, euro area real gdp rebounded strongly and rose by 12.4% quarter upon quarter in the third quarter, although remaining well below pre-pandemic levels. incoming economic data, surveys and high-frequency indicators ss that the resurgence of the pandemic, and the associated intensification of containment measures, have likely led to a decline in activity in the fourth quarter of 2020, and are also expected to weigh on activities in the first quarter of this year. in sum, this is broadly in line with the latest baseline of the december 2020 macroeconomic

projections. economic developments continue to be uneven across sectors, with the services sector being more adversely affected by the new restrictions and social interaction and mobility than the industrial sector. although fiscal policy measures are continuing to support households and firms, consumers remain cautious in light of the pandemic and its impact on employment and earnings. moreover, weaker corporate balance sheets and uncertainty about the economy outlook are still weighing on business investment. looking ahead, the rollout of vaccines, which started in late december, allows for greater confidence in the resolution of the health crisis. however, it will take time until widespread immunity is achieved

and further developments related to the pandemic cannot be ruled out. over the medium-term, the recovery of the euro area economy should be supported by favorable financing conditions and expansionary fiscal stance, and a recovery in demand, as containment measures are lifted and uncertainty receipts -- r ecedes. overall, the risks surrounding the growth outlook remain tilted to the downside, but less pronounced. the news about the prospects for the global economy committee agreement on future e.u.-u.k. relations and the start of vaccination campaigns is encouraging, but the ongoing pandemic and its implications for financial conditions continue to be sources of downside risk.

euro area annual inflation remains unchanged at -.3% in december, on the basis of current energy price dynamics, the headline inflation is likely to increase in the coming months. also supported by the end of the temporary vat reduction in germany. however, underlying price pressures are expected to remain subdued owing to weak demand, notably in the tourism and travel related sectors -- travel related sectors, as well as low-wage pressures and the appreciation of the euro exchange rate. once the impact of the pandemic fades, a recovery in demand, supported by fiscal and monetary policies, will put upward pressure on inflation over the medium-term.

survey-based measures and market-based indicators of longer-term inflation expectations remain at low levels, although market-based indicators of inflation expectations have increased slightly. turning to the monetary analysis, the annual growth rate of broad money increased to 11% in november of 2020 from 10.5% in october, reflecting a continued increase in deposit holdings. growth continued to be supported by the ongoing asset purchases by the euro system, which remained the largest source of money creation. in the context of this dolehide into preference for liquidity in the money holding sector, and the opportunity cost of holding the most liquid forms of money, the money aggregate has remained

the main contributor to broad growth. developments in loans to the private sector were characterized by moderate lending to nonfinancial corporations and resilient lending to households. the monthly lending flow to nonfinancial corporations remain very modest, in november, continuing the pattern observed since the end of the summer. at the same time, the annual growth rate remained broadly unchanged at 6.9%, still reflecting the increase in lending in the first half of the year. the annual growth rate of loans to households remained broadly stable at 3.1% in november, amid a sizable monthly positive flow.

the new bank lending survey for the first quarter of -- the fourth quarter of 2020 reflected the standards of loans in firms -- to firms. it which of them by the heightened risk seen from banks and concerns about borrower credit worthiness. surveyed banks also reported a fall in loan demands from firms in the fourth quarter. the survey also indicated the further increase in net demand from households for loans for house purchase in the fourth quarter come even though the credit standards continue to divest. overall, our policy measures coming together -- measures, together with other institutions, remain essential to support bank lending conditions and access to financing, in particular for

those most affected by the pandemic. to sum up, a crosscheck of the outcome of the economic analysis with the signals coming from the monetary analysis, confirm that an ample degree of monetary accommodation is necessary to support economic activity and the robust convergence of inflation to levels of that are below or close to 2% over the medium-term. regarding fiscal policies, an ambitious and coordinated fiscal stance remains could go in view -- remains critical in the euro economy. continue to support from national fiscal policies is warranted, given weaker demand from firms and households relating to the worsening of the pandemic and the intensification of containment measures. at the same time, fiscal

measures, taken in response to the pandemic, should as much as possible remain targeted and temporary in nature. the three safety nets endorsed by the european council for workers, businesses and governments provide important funding support. the governing council recognizes the key role of the next generation e.u. package and stresses the importance of it becoming operational without delay. it calls on member states to accelerate the ratification process to finalize their recovery and resilience plans promptly, and to deploy the funds for productive public spending accompanying -- or accompanied by productivity

enhancing policies. this would allow the next generation e.u. program to contribute to a faster, stronger and more uniform recovery, and would increase economic resilience and the growth potential of member state economies, supporting the effectiveness of monetary policy in the euro area. such structural policies are particularly important in addressing long-standing structural and institutional witnesses and in accelerating the green and digital transitions. we are now ready to take your questions. and i am delighted to introduce our new director of communication, who many of you know. >> thank you. the first question goes to cnbc. >> thank you very much. i have a question regarding the

favorable financing conditions. you have been elaborating on the tightening of conditions in europe. how concerned are you about the tightening and if it was to continue, would that mean the conditions are no longer favorable? my second question is on the economy and the renewed lockdowns in major economies in the euro zone, whether -- is affecting your outlook at all, because it does not seem to in your text? and how concerned are you about the creation of companies in that context? ms. lagarde: thank you so much. you have given me a chance to reverse the order of your questions. i would like to talk about the second part of the question, which has to do with the economic outlook, because that

determines, in a way, what was decided today at our monetary policy governing council. and when we look at the current economic situation, we are clearly seeing mixed developments. those mixed developments apply to member states that have been affected in different ways and to different degrees by the pandemic. so, if i was to sort of put int o categories the developments coming have the positive developments and of the not so positive developments. as far as the positive, i would certainly say that number one, the fact that the vaccination campaign has now started, albeit with some difficulty to begin with, but it has now started and we have two vaccines approved and probably a third one to come. that's the first positive. my next positive is that an

agreement was found between the e.u. and brexit. that has to be taken into account given that our december projection, which was predicated on the same basis as the european commission, assumed there would be no agreement and it would be a wto blunt agreement. the third positive, the fact that european leaders have now reached complete agreement, and have removed the last hurdles to the next generation e.u. issuance at the e.u., which really provides some certainty as to the fiscal stimulus that will be coming in the months to come. it's not completed, clearly the ratification process has to be completed for those resources to be made available, and to therefore permit the joint borrowing by the member states, and then the rrp, the recovery

and resilience plans have to be submitted as well, but it is a positive that has now been confirmed. i would list as part of the positives as well, the fact that in the euro area, manufacturing is clearly on the recovery path. when we look at the pmi, it is in positive territory. and finally, particularly the day after the inauguration of the new u.s. president, the uncertainty that related to the election of the georgia senators, that clearly had an impact on the senate, was also removed. that would be my category of the positives. if i look at the not so positives, clearly the pandemic has worsened in many countries. the lockdowns have been tightened. and for some of them, extended. the new variants from the u.k.,

south africa and brazil could require more stringent measures going forward. the incoming data suggests activity likely declined in the fourth quarter of 2020, which will have a bearing on the first quarter of this year. and whether we look at mobility data, whether we look at service pmi, or retail sales, those are the numbers that have declined in the last quarter of 2020. in that context, uh -- the inflation numbers remain extremely weak. we know that the december number is -.3%. we also expect the early numbers in 2021 will turn most likely positive for mechanical reasons

that have to do with the german vat rate, that have to do with the energy prices, but domestic pressure -- the domestic prices will continue to be subdued ow ing to weak demand, labor market slack, and the exchange rate depreciation. that is the lens could to which we have decided to reconfirm the monetary policy decisions that was made in december. and we do that against a projection, which was announced in december, which we will revisit for the next meeting in march, but which we consider still broadly funded on the basis of the pluses and minuses i have mentioned. but all of that is clearly tilted to the downside. we still have a lot of uncertainty about the current

pandemic, about the lockdown measures, the containments, and our forecast -- our projection from december, which we believe is still valid, was predicated on lockdown measures continuing through the first quarter of 2021. and the vaccination progressing very gradually. so these hypotheticals are being confirmed by what we see at the moment. in light of that, what we have decided is to reconfirm our december monetary policy decisions. and in doing so, we -- it's s teady, very focused and very attentive to all development. and ready to adjust, if necessary, our base of purchase

-- i will come to that in a moment -- but ready to use all the instruments we have available in little box. that's our framework at the moment. i will now zoom into the question that you asked about favorable financing conditions, because this is clearly the compass that we want to use, that's clearly anchored onto inflation. i will reread to you the key sentence, if you will, that we identified. the purchases will be conducted to preserve favorable financing conditions over the pandemic period. so, over the pandemic period is at least until the end of march 2022, or any such time when the governing council considers the pandemic is to continue. clearly that means we will be

present in the markets until the end of march 2022, at least. the second sentence matters as well. it says we will purchase according to market conditions with a view of preventing the tightening of financing conditions that's inconsistent with countering the downward impact of the pandemic on the projected path of inflation. so, favorable financing conditions is the compass, but the anchor is clearly above projected path of inflation and the necessity to counter the downward impact the pandemic has had on the inflation part. so, how do we sort of identify whether or not we are in the presence of a favorable financing conditions? i would say first of all it is based on a holistic and multifaceted approach assessment. and it's intended for all

sectors, for all sectors. so that means corporate sovereign's. we look at the banking lending rates, we look at the credit conditions, we look at the yields, the yields on corporate's, on sovereign's, and it is this composite approach into multiple indicators approach that we take into account to determine whether the financing conditions are favorable or not. but do not forget that that favorability is always assessed relative to inflation dynamics. so, we have to decide whether the financing conditions are appropriate to return inflation to its pre-pandemic path. i like to think in terms of this

compass and the anchor, and the two of them interact in order to assess whether or not we need to adjust and calibrate our purchases of any period. do not forget that -- is intended to preserve the financing conditions is earmarked by flexibility. you have heard me say before that it is flexibility for longtime sequences, for asset classes, and in countries. and it has this dual function. so, all of that remains unchanged. and the flexibility is still one of the key attributes of our pact. >> the next question goes to reuters. >> good afternoon, thank you for

taking my question. madam president, coming back to the point about preserving the current financing conditions, i am curious about your commitment and how far it goes. italy went through some political drama last week, but there was little market reaction, which was surprising. this was self-inflicted, a domestic issue with no connection to the pandemic, so why is the ecb supporting a market in such a case, and is it consistent with the parameters you set in the previous question? my second question has to do with the yield -- the president of the bank of spain said this is something the ecb should consider. what's your view of such a proposal? what's your reply to the commentary that the ecb is doing defective control