of the remarkable growth of china ’ s economy and recent policy measures adopted by its authorities, the international use of the renminbi has gained momentum. 4 and china ’ s plans to liberalise its capital account as well as to increase exchange rate flexibility and develop domestic financial markets will enhance the role of the renminbi as an international reserve currency. some analysts believe that, over time, it can reach international currency status, alongside the us dollar and the euro. 5 we would then enter an era of a tri - polar ims. unconventional monetary policy before the global financial crisis the widespread adoption of explicit price stability objectives had been conducive to prolonged low inflation outcomes alongside economic growth. major central banks were content to invoke the tinbergen principle, aiming to achieve their primary objective of price stability through a single monetary policy instrument : short - term interest rates. the global financial crisis changed this setting abruptly. pursuing central bank mandates in a zero lower - bound environment has meant that monetary policy needed to broaden the set of policy instruments at its disposal, including forward guidance and asset purchases by central banks. as a result of the latter, the balance sheets of all major central banks have increased significantly. one of the major challenges in the years ahead will be the differentiated normalisation of unconventional monetary policies in advanced economies. many have argued that in this process central banks in advanced economies should be mindful of the spillovers to the rest of the world. 6 there have even been calls for a fundamental strengthening of international this has been particularly visible in the rise of the renminbi as an invoicing and settlement currency for china ’ s international trade : while in 2010 almost none of china ’ s trade in goods and services was invoiced in renminbi, in 2014 this figure has risen to almost 25 %. similarly, the issuance of renminbi - denominated ( “ dim sum ” ) bonds has grown by a factor of about 30, albeit from a very low level. for a discussion of the international role of the renminbi, see eichengreen, b., and kawai m. ( 2014 ), “ issues for renminbi internationalization : an overview ”, asian development bank institute working paper, no 454, january. on recent trends in the ims, see the latest ecb report on the international role of the euro, frankfurt am main, 16 july 2014. see rajan, r. ( 2013 )

feeding into price and wage setting in a more persistent way. what is clear is that our monetary policy measures have been successful in avoiding a deflationary spiral and securing the anchoring of inflation expectations. in the past, as interest rates approached zero, some did question our ability to add sufficient accommodation to combat a prolonged period of too - low inflation. we answered those doubts by demonstrating that we would take any measures necessary within our mandate to deliver our mandate, and that those measures were effective in further easing financial conditions. deflation risk premia, which had been growing in 2014 and 2015, have now been more or less priced out of market - based inflation expectations. that being said, a prolonged period of low inflation is always likely to be exacerbated by backward - lookingness in wage and price formation that occurs due to institutional factors, such as wage indexation. this has plainly happened in the euro area. ecb analysis finds that, compared with long - term averages, low past inflation dragged down wage growth by around 0. 25 percentage points each year between 2014 and 2016. the evidence as to whether backward - lookingness has increased recently is mixed. there were signs that indexation had fallen in the early part of the crisis, and ecb empirical estimates 4 / 7 bis central bankers'speeches suggest that the weight of past inflation in current inflation has decreased. yet there is also evidence that indexation has returned in some large euro area countries. in italy, for example, backward - looking indexation of wages now covers around one - third of private sector employees. 7 still, even if indexation rose, it would only create inertia in price formation : it would not obstruct the transmission process. as economic slack shrinks, upward pressure on prices will materialise and gradually enter the indexation ratchet. so once again we see temporary forces at work that should not affect medium - term price stability. and this assessment is broadly what we see in market - based inflation expectations today. interpreting with some caution, they are now consistent with the picture that our policy is effective, but that its full effects will take time to materialise. accompanying the recovery so what do these various explanations imply for our monetary policy stance? the first point to make is that we face a very different situation today from the one we encountered three years ago. then, we also faced global shocks and significant labour market slack. but the recovery was still in its infancy. global growth was slowing,