, questioni di economia e finanza ( occasional papers ), 242, 2014. bis central bankers ’ speeches these policies would have been certainly regarded as “ conventional ” in the 1960s and 1970s given the emphasis on changes in the composition of private sector balance sheets both in actual policy - making and in academic works on the transmission mechanism of monetary policy. 7 what is more “ conventional ” for a central bank than creating base money? 10. asset purchases boost economic activity and raise inflation through several channels : they reduce yields on public sector securities, with effects on other segments of the financial market and on credit conditions for households and firms ; they increase the value of assets and hence private sector spending capacity ; they cause a depreciation of the currency, which impacts on imported inflation and exports ; and they improve inflation expectations and public confidence. 11. positive effects on the government bond market emerged as soon as the preparation of the programme was announced in early november 2014. since then, though with some reversal of the initial impact during the spring, the yields on tenyear german and italian government securities have fallen by about 25 and 80 basis points respectively. the stimulus has spread to market segments not directly affected by the asset purchases. the euro has depreciated by more than 12 per cent against the dollar and by around 8 per cent in nominal effective terms. 12. credit conditions have also been gradually improving since the announcement of the app : rates on new loans to firms and to households for house purchase have gone down by around 30 basis points on average in the euro area ; larger reductions were generally recorded in the countries hit by the sovereign debt crisis. positive effects can also be seen in lending volumes. after three years of contraction, the annual growth rate of credit to the non - financial private sector turned positive in april ; it stood at 0. 7 per cent in september. 13. the ultimate metric to gauge the effectiveness of the app is the normalisation of the inflation rate around its medium term target. it is too early to provide an assessment, given the lags of transmission of monetary policy, but the general improvements in financial conditions, the main channel through which the programme is expected to work, indicate that so far it has been successful. overall, the app has helped push the intended monetary policy accommodation through the intermediation chain and reach households and firms. this is expected to support economic activity and to produce a sustained adjustment of inflation rates towards levels consistent with the definition of price stability. 8 for italy

- term contracts. the employment - intensive nature of the recovery has therefore been confirmed. in recent weeks, signs of tension in the financial markets have intensified. the yields on italian government securities have turned upwards again. funding conditions and banks ’ market valuations have been affected as a result : in early october there was a steep drop in bank share prices and the cds spreads of the leading credit institutions were up sharply on the first half of the year. yet still today the central projection remains that of – albeit rather slower – economic growth in the short term. in july ’ s economic bulletin we had forecast an increase in gdp of 1. 3 per cent this year and of 1 per cent in 2019, assuming the full deactivation of the safeguard clauses on indirect taxation. the latest data suggest that, provided economic policy assumptions remain unchanged, growth will be slightly lower both this year and the next. the risks, especially those connected with the performance of world trade and the conditions on italy ’ s financial markets, have intensified. the accentuation of the protectionist stances of trade policies, enduring tensions in various parts of the world, and the knock - on effects on business confidence, could dampen world economic activity next year, slowing the impetus provided so far to our economy by the international context. on the home front, protracted tensions on the financial markets would have detrimental effects on the funding conditions of households and firms and on domestic demand. the government ’ s current legislation macroeconomic scenario, which does not incorporate the deactivation of the safeguard clauses on indirect taxation, envisages 1. 2 per cent gdp growth this year and 0. 9 per cent the next. this figure is within the interval of the estimates currently available, even if it is based on assumptions about exogenous variables that are relatively favourable compared with the latest trends. in the two years 2020 - 21 gdp is expected to expand by 1. 1 per cent. the policy scenario raises gdp growth forecasts to 1. 5 per cent next year, 1. 6 per cent in 2020 and 1. 4 per cent in 2021, thanks to the effect of the budgetary provisions. these measures are expected to have a significant impact ; the government ’ s estimate assumes that the values of the multipliers of the expansionary measures will be higher than those generally estimated for italy and that the measures set out in the update will stimulate economic activity already in the early months of next year. a more comprehensive assessment would require details that are not