non - financial corporations are, by and large, based on shorter - duration interest rates, even in countries in which the rate fixation period for bank credit is generally longer. as regards setting mortgage interest rates, the picture is more dispersed, with short and medium 3 / 5 bis central bankers'speeches maturities being the relevant benchmark in some euro area countries, and long - term interest rates in others. from this perspective, the complementary nature of our instruments – with forward guidance anchoring the short - to - medium term segment of the curve, and the asset purchase programme acting on the long - term segment – has given our monetary policy strategy an extra edge over the last few years. it has made it more targeted and thus more impactful. * * * as the economic prospects brighten, higher expected returns on business investment will make borrowing conditions increasingly attractive. this, in and of itself, will reinforce accommodation and make sure that inflation sustainably converges towards our objective of below, but close to, 2 % over the medium term. but our mission is not yet accomplished. we need patience and persistence. we need to be patient, because inflation convergence needs more time to show through convincingly in the data. the euro area ’ s economic environment is improving, and the fat negative tail to inflation expectations, which was so visible at the start of our asset purchase programme, has virtually disappeared ( see chart 4 ). this strengthens our confidence that headline inflation will gradually move towards the governing council ’ s objective. but measured inflation remains exceedingly volatile and metrics of underlying price pressures continue to be subdued. the entire distribution of inflation expectations still needs to shift a fair distance to the right. 4 / 5 bis central bankers'speeches and we need to be persistent, because the baseline scenario for future inflation remains crucially contingent on very easy financing conditions which, to a large extent, depend on the current accommodative monetary policy stance. 5 / 5 bis central bankers'speeches

effective they have been. * * * for some years, major central banks have been intervening in fixed income markets with the intention of providing substantial amounts of stimulus to their respective economies and delivering on their mandates. their interventions ultimately rest on the same premise : when the overnight money market rate typically used by central banks as a policy instrument reaches a level that cannot be further reduced to any meaningful extent, the natural progression is to extend 1 / 5 bis central bankers'speeches the maturity range of interest rates that the central bank seeks to influence. this can be done in two ways, which strongly complement each other. first, by influencing expectations of short - term interest rates via signalling channels, and second, by central bank purchases of long - dated securities which crowd out private demand for such instruments, making them more expensive and thereby encouraging portfolio rebalancing. both instruments have the same purpose – exerting downward pressure on long - term yields. this is why they complement each other and rely on one another to be effective. asset purchases almost certainly enhance the credibility of a central bank ’ s signals that it will follow a certain course of action for setting policy rates in the future, as these purchases are a concrete demonstration of a desire to provide additional stimulus. so, the anchoring of rate expectations is reinforced by asset purchases. and, conversely, the net stimulus provided by asset purchases through compression of the term premia depends, in part, on expectations of how policymakers will adjust short - term interest rates in the future in response to the stronger real activity and inflation sparked by lower term premia. if short - term interest rate expectations are not well anchored throughout the life of the asset purchase programme and are allowed to creep upwards, then the entire exercise to ease financial conditions becomes self - defeating. this is why anchoring interest rate expectations is a key condition for asset purchases to deliver accommodative monetary policy. from this perspective, the ecb has been very effective in designing and implementing its programme. as demonstrated by the overnight index swap forward rate curve, once we launched our monetary policy package in mid - 2014, the short - to - medium segment of the curve, which arguably reflects investors ’ rate expectations most clearly, shifted down and became flatter ( see chart 1 ). this reaction is especially striking when compared to the us experience during the period in which the federal reserve carried out its large - scale asset purchases. one reason why interest rate expectations have been well - anchored in the euro area is