>> i'm pretty convinced the u.s. is going to see a gigantic rebound. >> there's a huge bounce that's coming as we normalize. >> there's very high degrees of household savings, which support a strong rebound when it comes through. >> fed policy inevitably at some point is going to shift. >> the market knows that if financial conditions really start to tighten, the fed can do a lot more. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. a simulcast, radio and

television. not a dull thursday. claims in this hour, second right now to what we see in the european union. for our american viewers, it is about christine lagarde moves the bond market. jonathan: it is. and the european drug agency is set to recommend the j&j vaccine. good news for the confident on the vaccine rollout. yields are aggressively lower in italy now, down by eight basis points. we break 60 basis points. it is a pledge to take the pandemic emergency purchase program and do more with it up front, quickly, over the next quarter. tom: i have never seen this polarity between the you and america. we have the shock and mark -- between the eu and america. we have the shock denmark/astrazeneca headline. jonathan: you get a bid into the european market, yields lower on treasuries, and the nasdaq

accelerates a little more as well. the ecb president in a small way, just a small part of this story, offering a lift to big tech this morning as well. tom: lisa, what is your take on all of this news from america, the challenges in europe, and what it means for the view forward? lisa: i am struck by the global nature of the bond market right now and how much of a conundrum that presents the fed and the ecb as the fates of these regions diverge. the ecb is saying we need to keep monetary conditions even looser than they have been, while the fed comes in and tries to up their forecast for growth and hedge this cap between a stronger outlook, as well as keeping relatively easy monetary conditions. bond markets are interlinked. tom: the pacific rim coming back after a number of difficult days. it is a packed hour. what we are going to do is get to our esteemed guest. moving to claims at 8:30,

lagarde at 8:30 as well, jon ferro's "the open" at 9:00 a.m. foreign-exchange here, dollar weaker come again turning -- weaker, yen churning. euro-dollar can't get out of its own way. sterling doing a little better here. jonathan: it is off the back of what we see in europe. if you are chairman powell right now, thank you for that one, madame lagarde. you get a bond market anchored by the ecb pledging to do more. the italian bond market is bid. yields are lower by 10 basis points to 0.570%. an ecb watcher, good friend of this program, saying maybe they should just canceled the press are now and book the profits because -- cancel the

presser now and book the profits because this move is in. tom: piecing this together, and boy is this the right guest to have at this moment, sebastien page of t. rowe price, a multi-asset strategist. his book "beyond earth diversification" is exceptionally acute about what to do even the maelstrom of new slow we have seen today. what is your major message on how to reallocate now? is it to go back to fundamentals, or is there a new set of rules? sebastien: there is a new set of rules in this much lower rate environment. the one question for investors i think in 2021 is will rising rates be good or bad for stocks? i know you talk about it a lot on this show. think of things like coffee, egg yolks, red wine.

you don't really know if they are good or bad for you. it is the same with rising rates. you don't really know if they are good or bad for stocks. dividend discount model will tell you if the discount rate blows up, valuation goes down. also, you can think of higher expected returns on bonds. i know right now, rates are coming down in europe, and we will see them come down in the u.s., but we are in a rising rates environment in this recovery phase, so the expected return on bonds makes bonds more attractive than stocks. but here's the rub. the fed is only comfortable raising rates when they expect positive growth, and positive growth surprises are good for stocks. we just did an analysis that shows if you go back 30 years and look at 12 month periods, you can find 7212 month period -- find 72 12 month periods

during which the s&p 500 was over -- and the hit rate, the percentage of times stocks made money, is 100%. so it is not theorizing whether rates are good or bad for the market. it is the number one question for investors in 2021. it is, and a sense, a new set of rules because of the low-level we are starting with an the $25 trillion in stimulus. ultimately, we are long the recovery trade, like a lot of your guests. jonathan: when we ask ourselves are real rates good for the equity market, we also have to answer where are we in the cycle. if you are in the recovery stage and yields start to pick up, isn't that typically a good thing for stocks? sebastien: it is a good thing for stocks because you get positive growth shocks typically, and also positive earnings surprises. the earnings forecasts for the year are pretty high.

25%, 30%, depending on which parts of the stock market you're looking at. so the bar is high, but rising rates can coexist. you don't necessarily need to say they are good for stocks, but they can coexist with very positive stock returns. i know you were just talking about the denmark news and issues with the vaccines in europe. overall, the news on the vaccines has been phenomenal. we track this probability from a group called the super forecasters. they have a probability that you will have enough doses to inoculate 200 million people by july. that probability prior to pfizer in november was 10%. it even dipped as recently as january to below 20%. right now it is 99%. so it is human nature to focus on the negative side of the news, but the vaccine developments have been phenomenal. it is our base case that we are in a race between vaccines and new strains.

it is our base case that vaccines will win that race. lisa: it may win in certain regions faster than others, and that is what we have been talking about with the u.s. versus the european union. how much of a boost do u.s. fixed income markets get from very easy and easier ecb policies? sebastien: i think you see the market movements this morning. they respond to it. but ultimately there is a little bit of noise here. the u.s. bond market will be driven by big macro forces, the forces of the recovery, the stimulus, the fiscal measures, and it will be a lot more driven by what we will hear from the fed over the next few weeks. that will be fairly dovish. you will still see, because of the recovery, rising rates, but i don't expect rising rates to negatively impact real rate returns. it is dovish.

jonathan: good to see you, sebastien page, t. rowe price multi-asset strategist, on a better outlook for the united states, and a worse one, relatively speaking, for europe. in many ways, the european bond market can anchor rates. i would caution that view. back in 2018, the spread widened out to 279 basis points, 100 basis points north of where we are now. tom: what is the equivalency in europe, to present -- in europe, 2%? jonathan: the outlook improves for the bond market because the ecb is pledging to do more. what about the vaccine rollout? from the european drug agency, it is set to recommend the j&j vaccine for the bloc. joining us now is sam fazeli of bloomberg intelligence.

set the scene first on what has been happening in europe with the vaccine rollout. sam: hi jon. obviously it has been slower than expected. i do feel the momentum building. local pharmacies and doctors are making noises about inspecting to get doses of astrazeneca next week, and now are running around thinking about the logistics of trying to get it into people's arms. europe is much more rural than israel or the u.k. which has managed to do more rapid vaccination. the challenge is to get the doses to these people. tom: why isn't there more pfizer in europe? astrazeneca is a train wreck right now. norway just out with a headline on this matter. why aren't pfizer and moderna with their u.s. success in europe more? sebastien: they are, there's no

question about it. the next thing coming up hopefully would be johnson & johnson. but these companies face some production and manufacturing issues. so that is what is driving this. let's not forget the european union was relatively slow in getting these deals signed, whatever it is they were worrying about trying to achieve. that is why they end up at a slightly different line. the issue with the astrazeneca vaccine, you are going to hear this from other vaccines as they start getting rolled out. somebody has a reaction, and the local authority or health care authority does what is right and says, let's assess and go back. that is absolutely the right thing to do. lisa: but how much does that give credence to some of the skeptics of vaccination saying it is too early, this has been rolled out in months, and the likes of denmark raising questions about some of the

health ramifications? what do you say to those people? sonali: i would rather -- sam: i would rather have my health system keeping an eye on side effects as they arrive and making sure they are related to the vaccine, and if they are not, then covering this kind of path. so this is absolutely the right way to do it. skeptics or no skeptics, any vaccine that is rolled out has to be looked at under the microscope like this, and there will be other issues like this. let's be honest, we have no idea what this is to do with. close to 24 million people have been vaccinated in the u.k. where's that news? none. jonathan: good to catch up, sam fazeli of bloomberg intelligence. another headline out of denmark to pause vaccinations from astrazeneca. the decision is precautionary together information. lisa: on the flipside, the

united kingdom saying the astrazeneca vaccine is safe, despite the concerns being raised by the likes of denmark and norway, which raises this conundrum of how you accelerate the take-up of vaccinations while also being really transparent about any emerging scientific evidence. jonathan: shout out to the team in frankfurt, germany that lead our ecb coverage because another headline crossing the bloomberg. it is remarkable some of the reporting the team does come about because -- the team does, because this is from a press conference that haven't even started. the ecb is set to say that the risk to the outlook has become more balanced. usually they would say the risk to the outlook is tilted to the downside, and that the risks are still tilted to the downside, but increasingly become a more balanced area i don't want to get ahead of what the president says. slightly more constructive, i think it's what you've got. lisa: whatever that means. tom: maybe she will be on clubhouse. jonathan: norway and denmark are

pausing the astrazeneca shot. sweden's has no reason to change the recommendation of the astrazeneca shot. you are going to hear a lot more out of europe on this topic. from new york city this morning, good morning. this is bloomberg. ♪

pres. biden: i want to thank

speaker pelosi and the house of representatives. this bill represents a historic victory for the american people. i look forward to signing it later this week. jonathan: a $1.9 trillion effort down in washington, d.c. the president will be signing that in the next 24 hours. alongside tom keene and lisa abramowicz, i'm jonathan ferro. let's get straight to the bond market this morning as we count you down to an ecb news conference in frank for it, germany president lagarde -- in frankfurt, germany. we got a monster bid on tins in italy, down nine basis points. we've got a class across the continent. there are a couple of news conferences happening simultaneously around the use of the astrazeneca vaccine across the european union. what we've heard so far this morning was denmark pausing the use of the shot. norway follows up by doing basically the same thing. sweden says no reason to change the recommendation. when you have different

countries doing different things with the same vaccine, what do you get? confusion. we don't want confusion at a time like this. tom: the hallmark for luk -- the homework of bloomberg news is to be able to bring headlines from sources all around the world. i cannot emphasize the cacophony of the headlines in the last 90 minutes. it has been truly extraordinarily. jonathan: there is a single batch reportedly evan astrazeneca vaccine over in italy -- reportedly of an astrazeneca vaccine over in italy, banning that particular batch. they are commenting that people should still go and get the vaccine. it is the astrazeneca vaccine, and nobody on this program is qualified to say anything about this particular vaccine. we are just here to bring you the news and talk about what is happening across europe right

now. the read across is pretty clear. this will undermine public confidence in this vaccine rollout. jonathan: you've got the polarity of stocks up big, and i just sent a message to our radio leadership about this unusual press conference. this time may be different. this may be a really interesting hour and a half with madame lagarde. jonathan: has the outlook got better? not good enough. undo tightening -- undue tightening. our team reportedly saying that would we get those forecasts, we will get a language shift around those that the risk around the outlook has become a little more balanced. i think it is going to be very interesting. tom: we will monitor this very carefully. right now, and this is well-timed, sarah bianchi joins us, evercore isi head of u.s. public policy and political strategy. actually, very experienced in

the washington science of gridlock. did we just see the end of gridlock? is this what less gridlock looks like? sarah: well, it certainly is an impressive victory, even though there were no republicans on this bill. with the 50 vote senate, it is a narrow majority. you have to give your hats off to president biden and his team with the narrow majority in the house. i think they are showing you that they are here to get things done. their next packages going to be even harder, so i am not sure the era of gridlock is over. they will try to do things to pass taxes and more difficult spending. certainly today, they ought to feel very good. lisa: is there any chance at a bipartisan infrastructure bill? sarah: i think there is a possibility they could pull off some of the infrastructure pieces and try to pass that in a bipartisan way. we have seen senator manchin

already saying i am not going down this other route again. i've done the reconciliation only thing. but i don't think you are going to see republicans really biting on some of these tax revenues the democrats are talking about, so the only way i see bipartisanship is if they are willing to pull off $500 billion, $1 trillion on infrastructure. tom: does $1.9 trillion due income replacement in the emergency of the have-nots in america, or could it actually advance prosperity and productivity in america? sarah: there's a lot in this bill for everybody. this checks, and there is child resources for families with children. but there's also some testing and some vaccination money that should benefit all of us across the board. i think really, the next bill is designed to really strengthen the country.

that is where the infrastructure comes. that is where the r&d comes for things like 5g. so i think the next one is really more of an investment in the country, but this one, the biggest stimulus for all of us is if we can get out of covid. so i think all of it will be benefit to everyone, but it is not all of interest for sure. jonathan: sarah, thank you. as we continue to count you down to an important news conference in frankfurt, germany, there is a bid in the bond market across europe and in the united states to some degree. ecb has left policy unchanged, but pledged to do more with an extensive bond buying program, leaning into the high yields we have seen in the last 30 days. you get lower yields in italy by 9, 10 basis points. largely the same story across the continent. the story for me is around communication. i've spent a lot of time talking to many people in this market

who are very close ecb watchers, who are a little bit unconvinced about the communication coming out of the ecb at the moment. we had a really clean signal in the press release about 45 minutes ago. in the last 20 minutes, we had some reporting from a fantastic team in frankfurt, germany that undermines some of the signaling out of the ecb and leaked some of the story just before the news conference begins, the president lagarde is perhaps going to tell us that the outlook has become more balanced. i think there's concern about whether there are people in the governing council that are willing to undermine and get out in front of the ecb chief. tom: it is completely foreign in the news flow we see and what we hear from our extreme to -- from our x steamed -- from our esteemed experts. jonathan: we will get the forecast in about 10 minutes. lisa: it is very tricky because she's also going to have to parse out how much the ecb has

to step in and respond every time there's a delay in the vaccination rollout. there's this sort of asymmetric risk for the ecb to do too much, and all of a sudden have nothing left if there is a true problem. honestly, i am struck by this difficulty they have managing a problem in real-time time that seems to be getting worse if you look at the astrazeneca news today. tom: can i mention claims as well? it's five minutes, and claims are going to be north of 700,000. jonathan: i think we've got to get back to twos, and fast. where central bankers have got to have credibility and authority, with the governin g council undermine that at the ecb? we will bring you initial jobless claims first in america, an important data point. then we will get to the news

conference in frankfurt, germany, with the ecb pledging to do more upfront front and lean into market conditions. yields lower across europe. your forecast, your news conference your claims, next. this is bloomberg. ♪

jonathan: from new york city for our audience worldwide, this is "bloomberg surveillance." equity futures nicely bid. a couple of things to get through in the next 30 minutes. initial jobless claims in america and then head to frankfurt, germany for a news conference with christine lagarde. let's get some data with michael mckee. michael: happy pandemic anniversary. it was one year ago today the world health organization declared this a pandemic than we started seeing a norma's jobless claims and we still do. 712,000 last week. that is lower than the forecast for 725,000. the initial report last week was 745,000. looking at a drop of 35,000, 33,000 on the week, but we are

still over 700,000. i do not know if we have this chart ready, but this is the 51st week we have been above the previous record high of 695,000 back in 1982, when tom keene still wore regular ties. it has been a long period of bad news. michael: one, two, eight weeks where we have a trend off the grim weeks of middle january. is that a legitimate trend to you or chairman powell? michael: it does seem to be a legitimate trend but we cannot trust the numbers. we do not know exactly how many claims are out there. as long as you're looking at those kinds of numbers, you are looking at bad news for the overall economy. the four week total of claims is back up 20 million.

it dropped to 18 million in the week of february 13. february 20 we are over 20 million again. tom: thank you so much. we go to madame lagarde now. jonathan: let's head to frankfurt, germany to listen to the ecb president. pres. lagarde: looking ahead, the ongoing vaccination campaigns, together with the gradual relaxation of containment measures and expectations of a firm rebound in economic in the course of 2021. inflation has cap over recent months, mainly on account of transitory factors and an increase in energy price inflation. at the same time, underlying price pressures remain subdued in the context of week man and significant slack in labor and

product markets. while our latest projection forecast will see in a gradual increase in underlying, we have cared the the commercial outbreak stays broadly unchanged from december 2020 and below are in nation a. -- below our inflation aim. preserving financial conditions over the pandemic period remains essential. financial conditions are defined by a holistic set of indicators spanning the entire transmission chain of monetary policy, from risk-free interest rates.

market rates have increased since the start of the year, which poses a risk to water financing conditions. banks use risk-free interest rates and sovereign bond yields as key references for determining credit conditions. if advisable and persistent increases in this market interest rates were left unchecked could translate into a premature tightening of conditions for all sectors of the economy. this is undesirable at a time when preserving favorable financing conditions still remains necessary to reduce uncertainty, thereby underpinning economic activity and safeguarding medium-term price stability. against this background, the

governing council decided the following. we will continue to conduct net asset purchases under the pandemic emergency purchase program under a program of 800 billion euros until at least the end of march 22, or until the council of judges the coronavirus crisis phase is over . based on enjoys assessment of financial can -- based on a joint assessment of financial conditions and the outlook, the council expects purchases over the next quarter to be conducted at a significantly higher pace than during the first month of this year. we will purchase flexibly according to market conditions, and with a view to preventing a tightening of finance conditions

inconsistent with countering the downward impact of the pandemic on the projected path 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 with asset purchase flows that do not exhaust the envelope over the next horizon of the pepp, the envelope need not be used in full. equally the envelope can be recalibrated if required to maintain favorable financing additions to help counter the negative pandemic shock to the part of inflation. we will continue to reinvest the principal payments from maturing securities purchased under the pepp until at least the end of

2023. in any case the future rolloff of the pepp will be managed to avoid interference with the appropriate monetary policy. purchases under our net purchase program will continue at the monthly pace of 20 billion euros. we continue to expect monthly net asset purchase under the app to run as long as necessary to reinforce the accommodative impact of our policy rates and to end shortly before we start raising the key ecb interest rate. we also intend to continue reinvesting in full the principal payments from maturing securities purchased under the app for an extended period of time past the date when we start raising the key ecb interest rates, and in any case for as

long as necessary to maintain favorable liquidity conditions and an ample degree of monetary accommodation. third, the governing council decided to keep the key ecb interest rates unchanged. we expect them to remain at their present or lower levels until we have seen the inflation outlook converge to a level sufficiently close to but below 2%. such convergence has been consistently reflected in underlying inflation dynamics. finally, we will continue to provide ample liquidity through our refinancing operations, in particular our third series of targeted longer-term refinancing operations, tltro, remains an attractive source of funding for banks, supporting bank lending to firms and households.

preserving favorable financing conditions over the pandemic period for all sectors of the economy remains essential to underpin economic activity and safeguard medium-term price stability. we will also continue to monitor developments in the exchange rate with regard to their possible implications for the medium-term inflation outlook. we stand ready to adjust all of our instruments as appropriate to ensure inflation moves towards our aim in a sustained manner in line with our commitment to symmetry. let me now explain our assessment in greater detail, starting with the economic analysis. following the strong rebound in growth in the third quarter of 2020, euro area real gdp declined by .7% in the fourth quarter.

looking at the full year, real gdp is estimated to have contracted by 6.6% in 2020. with the level of economic activity for the fourth quarter standing 4.9% below its pre-pandemic level at the end of 2019. incoming economic data, surveys and high-frequency indicators, point of continued economic quickness in the first quarter of 2021 driven by the persistence of the pandemic and the associated containment measures. as a result, real gdp is likely to contract again in the first quarter of the year. economic development continue to be uneven across countries and sectors, with the services sector being more adversely affected by the restrictions on social interaction and mobility

than the industrial sector, which is recovering more quickly. although fiscal policy measures are supporting household and firms, consumers remain cautious in the light of the pandemic and its impact on employment and earnings. moreover, weakened corporate balance sheets and elevated uncertainty about the economic outlook are still weighing on business investment. looking ahead, the ongoing vaccination campaigns, together with the gradual relaxation of attainment measures, barring any further adverse developments related to the pandemic, underpin the expectations of a firm rebound in economic activity in the course of 2021. 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. this assessment is robbery reflected in the baselines and -- is broadly reflected in the baseline scenario of the march 2021 macro economic projections for the euro area. these projections foresee annual real gdp growth at 4% in 2021, 4.1% in 2022, and 2.1% in 2023. compared with the euro system staff economic projections, the outlook for economic activity is broadly unchanged. overall, the risks surrounding the euro area growth outlook over the medium-term have become

more balanced. downside risks remain in the near term. on the one hand, better prospects for global demand, bolstered by the sizable fiscal stimulus and the progress in vaccination campaigns, are encouraging. on the other hand, the ongoing pandemic, including the spread of virus mutations, and its implications for economic and financial conditions. euro area annual inflation increased sharply in january and february, up from negative 3% in december. the upswing in headline inflation reflects a number of idiosyncratic factors, such as the end of the temporary vad rate reduction in germany, a delayed sales period in some

euro area countries, and the impact of the stronger than usual changes in hi cp weights in 2021, as well as higher energy price inflation. on the basis of current oil futures prices, headline inflation is likely to increase in the coming months. some volatility is expected throughout the year, reflecting the changing dynamics of the factors currently pushing inflation up. these factors can be expected to fade out of annual inflation rates early next year. underlying price pressures are expected to increase this year due to current supply constraints and the recovery in domestic demand, although pressures are expected to remain subdued overall, also reflecting low wage pressures and the past

appreciation of the euro. once the impact of the pandemic phase, the unwinding of the high level of slack supported by accommodative physical and monetary policies will contribute to a gradual increase in inflation over the medium term. survey-based measures and market-based indicators of longer-term inflation expectations remain at subdued levels, although market-based indicators have continued their gradual increase. this assessment is broadly reflected in the baseline scenario of the march 21 ecb staff macro economic projections for the euro area, which foresees annual inflation at 1.5% in 2021, 1.2% in 2022, and 1.4% in 2023. compared with the december 2020

euro system staff macro economic projections, the outlook for inflation has been revised up for 2021 and 2022, largely due to temporary factors and higher energy price inflation, while it is unchanged for 2023. turning to the monetary analysis. the annual growth rate of broad money 12.5% in january after 12.4% in january and 11% in november. strong monetary growth continued to be supported by the ongoing asset purchases by the euro system, which remained the largest source of money creation. the narrow monetary aggregate has remained the main contributor to broad money growth, consistent with the still heightened preference for liquidity in the money holding sector, and the below

opportunity cost of holding the farms of money. development in loans to the private sector, characterized by somewhat weaker lending to nonfinancial corporations and resilient lending to households. the monthly lending low to nonfinancial corporations continued the moderation observed since the end of the summer. at the same time, the annual growth rate remained broadly unchanged at 7%, after 7.1% in december, still reflecting the strong in recent in lending in the first half of the year. the annual growth rate of loans to households remained broadly stable at 3% in january after 3.1% in december. a solid positive monthly flow.

overall, our policy measures, together with the measures adopted by national governments and other european 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 confirms an ample degree of monetary accommodation is necessary to support economic activity and the robust convergence of inflation to levels below but close to 2% over the medium-term. regarding fiscal policy, an ambitious and chlorinated fiscal -- and coordinated fiscal stance remains critical. to this end, reports on national

fiscal policies should continue given week the man from firms and households related to the ongoing pandemic and the associated containment measures. at the same time, fiscal measures taken in response to the pandemic emergency should come as much as possible, remain temporary and targeted in nature to address vulnerabilities effectively and to support a swift recovery. the three safety net 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 eu package, and stresses the importance of it becoming operational without delay. it calls on member states to ensure the timely ratification of the resources decision to

finalize the recovery and resilience plans promptly and to deploy the funds for productive public spending, accompanied by productivity enhancing structural policies. this would allow the next generation eu program to contribute to a faster, stronger, and more uniform recovery, and would increase economic resilience and the growth potential of member states economies, thereby supporting the effectiveness of monetary policy in the euro area. such structural policies are particularly important in addressing long-standing structural and institutional weaknesses, and in accelerating the green and digital transitions. thank you very much. we are now ready to take your questions. >> thank you very much. we have change the set up in the vigil of the press conference

and we hope you like it. the first question goes to politico eu. >> thank you very much. you have announced db will significantly increase on sides over the next two months. given the flexibility you have, what cap you from increasing the purchases so far? my second question would be -- could you quantify that? where does it stand? 25 billion a week or closer to 30 billion a week? pres. lagarde: thank you so much for your question. your first question is why did we not start earlier? the answer to that is, of course we have flexibility, but we made a commitment in december that we would preserve favorable

financing conditions that would entail tightening. that would prevent us from actually following the inflation path that serves for us as the anchor of our policy. you have on the one hand, flexibility, you have on the other hand our commitment to preserving favorable financial conditions and it clearly to the inflation outlook. this is clearly a monetary stance decision and one that requires the governing council to be involved. given that we were a few days away from the governing council meeting on monetary policy, and that we were a few days away from having the provisions provided by ecb staff, we thought it would certainly be a better idea to do the analysis of the joint assessment that we

want to conduct in order to determine what kind of increase, significant increase, as you rightly said, would be needed in order to respond to the commitment we made. do i have a number in mind to explain significance? the answer to that is no. no for a very specific reason. it is that we want to deliver in our commitment. that commitment, made in december, was to preserve favorable financing conditions. point number one. point number two, we have full flexibility under pepp. that is the cornerstone of pepp. but to actually assess jointly favorable financial conditions, determine their favorability in

relation to the inflation outlook, we are not bound by any particular specific number. what the governing council has provided -- the governing council has decided is to come and i will read the exact sentence, the governing council expects purchases under the pepp for the next quarter to be conducted at a significantly higher pace than during the first month of the year. this is what has been decided by consensus of the governing council. significant increase of the purchases. we are looking at a time horizon of a quarter, which conveniently coincides with the staff provisions we receive on a quarterly basis, and which will enable us to actually identify

whether the financing conditions have evolved, remain favorable, and actually help us to counter any downward pandemic affect on our inflation path. i am also happy to explain exactly what we mean by financing conditions and favorable financing conditions. i know this was a question many of you have. should i do that? yes. i am sorry if i'm stealing the thunder of some of those who wants to ask the question, but i know it is a question that is on your mind. when we measure financing conditions, i use two words that some of you found questionable or a bit strange. i use the word holistic and i use the word multifaceted. it was not -- it was very targeted as a particular indicator. let me take you through the holistic.

what we mean by holistic is weak covert the chain of transmission -- we cover the chain of transmission from the upstream stage, where you find a risk-free interest rate, where you find sovereign yields, to the downstream aspect of the credit terms. that clearly includes the multiplicity of rates that we all look at as well. it has to do with a stage where monetary policy -- upstream, eventually down to interest, to risk-free interest rates. it is a segment that response quite rapidly, which is measured on an ongoing basis, and where our monetary policy to be most efficient. that is not enough. what is important is that financial institutions, those that provide financing to the

economy, actually use those rates to determine the credit terms they are then going to offer. that upstream is clearly an important component, but it is not the component of our assessment of the financing conditions, which is why use the word holistic. we go from ups t downstream. the second word i used, which is multifaceted, was also apparently a bit of a puzzle for some. multifaceted, we organize information in a multidimensional form, that might be more convenient, where each indicator can be studied in its own right, and assessment is not based on an aggregated measures. we do not operate mechanically, we look at all of the indicators, we focus on what is upstream because that is where we can act and that is where banks and providers of financing

actually take their clue about the credit terms they are going to offer. it is also important to be multifaceted. there are some downstream components that are not necessarily going to be influenced by upstream movement. take physical measures that have -- take fiscal measures that have been rightly decided, such as providing moratorium on guarantees. it will have an impact on the downstream aspect of the indicators. in the same way, our tltro is also helping the downstream aspect of what we are looking at. that is the reason why we look at financing conditions, looking at the upstream, the downstream, but looking at them in their own right in a holistic way, the whole transmission chain, and

each and every one of them, because they might respond differently depending on what is addressed to them. the second question is how do we assess favorability? if you look carefully at the introductory statement, we referred to a joint assessment of how financing conditions and our inflation outlook have evolved since last time we identified favorability and continued our assessment. we look at the main drivers. concerning the anchor i have used last time we had the press conference, it is the inflation outlook. the assessment of the financing conditions, the determination of how favorable they are is going to be done in conjunction with the inflation outlook. the compass we have, another word i used, are the financing conditions. we use all of that, and with a

bit of good work, good analysis based on provisions and the joint assessment, our monetary policy will contribute to taking the economies across the bridge of the pandemic we are suffering from, and have been suffering from last year or so. thank you. >> the next question goes to bloomberg news. alexander? >> good afternoon. on the rise in bond yields, we've heard different views in the past few weeks, and some that it can be warranted. what led you to conclude bond purchases must pick up in the coming quarter? also, on the change in language, should market participants expect a change in the pace of pepp