inflation. at the same time, global headwinds have undisputedly accelerated, and uncertainty has increased, mainly related to the rising threat of protectionism. in this environment, the governing council last week extended its forward guidance on rates and now expects them to remain at their present levels at least through the first half of 2020, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 % over the medium term. we have also announced the technical parameters governing tltro iii. 13 / 14 bis central bankers'speeches the governing council is determined to act in case of adverse contingencies and stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards the governing council ’ s inflation aim in a sustained manner. thank you. 1 of course, such models cannot differentiate between different policy instruments. but the effects of policy tightening or easing should, in principle, have similar effects on asset prices across the central bank ’ s toolkit. 2 see cœure, b. ( 2018 ), “ the persistence and signalling power of central bank asset purchase programmes ”, speech at the 2018 us monetary policy forum, new york city, 23 february. 3 for example, swap dealers use positions in bunds to hedge interest rate risk on swaps. 4 the phasing in of banks ’ liquidity coverage ratio and net stable funding ratio is also likely to have contributed to this secular effect. 5 ecb staff have further refined and expanded the methodology used to calculate the bond free float for the aggregate of the four largest euro area countries that together account for around 80 % of euro area sovereign debt and gdp. there are a number of methodological differences and enhancements compared with the bond free float shown in cœure ( 2018 ), op. cit. the new measure is based on security - level information from the quarterly securities holdings statistics. these data are only available from the last quarter of 2009 but allow for a more granular analysis that also takes into account holdings by other less price - sensitive investors, such as insurance companies and pension funds. total outstanding debt relates to general government debt and not to the central government. estimates for the euro area bond free float proxy are naturally higher than for germany as foreign exchange reserves are predominately held in german bunds. for more detail, see eser, f., lemke, w., ny

purchases did not trigger an unwarranted tightening in financial conditions. but this would be far too simple, of course. financial asset prices, as you know, reflect the effects of a large number of forces at any given point in time, pulling yields in different, and often opposing, directions. to make some sense of changes in asset prices, ecb staff use an array of analytical tools, including exploiting crossasset price restrictions to identify the possible sources of economic shocks. an unexpected tightening in monetary policy, for example, is assumed to lead to higher yields, lower stock prices and an appreciation of the exchange rate, just like textbook economics would teach. you can see the outcome of such an exercise for the ten - year euro area overnight index swap ( ois ) on my second slide. clearly, according to this model, a number of factors, including global and euro area monetary policies, have contributed to the downward pressure on yields since the start of the year. in other words, there are no signs that the effects of our asset purchases started to evaporate the moment we stopped expanding our balance sheet. 1 2 / 14 bis central bankers'speeches indeed, i would argue that the effects of asset purchases are highly persistent, and that they have affected recent pricing dynamics in two important ways : through a yield level channel and through a yield sensitivity channel. the persistence of stock effects the first channel relates to the growing evidence that central banks, through their stocks of acquired assets and by reinvesting maturing principals, can persistently lower the yield level around which investors evaluate changes to the economic outlook. i have laid out the mechanics behind the persistent impact of asset purchases in previous speeches. 2 in short, as the central bank reduces the bond free float – the share of outstanding government bonds held by private price - sensitive investors – it also reduces the compensation, or term premia, that investors, as a whole, demand for holding long - term bonds. a crude yet simple way to see this is to look at the correlation between a measure of the bond free float and the spread between ten - year german bund yields and corresponding ois rates. you can see this on my next slide. 3 / 14 bis central bankers'speeches the intuition is that, both being risk - free assets, changes in the economic outlook or monetary policy expectations would shift bund and ois yields to a similar degree. 3 a sudden spike in risk aversion, such as during the sovereign debt