scope, if the necessity is there. if the price of oil does not continue to go down ( it cannot go down indefinitely ), we will see a jump in inflation in the last quarter of this year. but we may have before that some months of negative inflation. until now we have not seen a reason to doubt that the programme will work. the staff projections are recent, predicated on the completion of the whole programme and foresee inflation at 1. 7 % by 2017. but we are prepared for any contingency. what can monetary policy do for growth and potential growth? monetary policy affects growth via financial conditions, which affect expenditure decisions, investment and the aggregate demand. what is more difficult for monetary policy is to affect potential growth. that depends very much on the growth of labour supply, technological progress, increasing productivity, organization of production. that ’ s the supply side. the effects of monetary policy on that are very indirect. europe has a big problem of low potential bis central bankers ’ speeches growth. it starts with demography : the working population is decreasing, so productivity has to be increased even more to compensate for it. potential growth is very low and in present conditions, we fear that this will be a protracted period of low growth. this prospect of protracted low growth is shared by all advanced economies. so europe has to do more in terms of supply side reforms, investment, productivity growth to get out of this situation. is embracing immigration important for europe? in general yes. but there are two dimensions to this : one is the medium to long term issue of immigration and demographic developments, and the other is the short term crisis of refugees that raises a lot of logistical issues, among others. to me, it ’ s clear that immigration is one of the things that can improve the demographic potential of europe, which is necessary, if europeans think and care about the welfare of future generations. the size of the working age population of the euro area is declining 0. 6 percent a year until the 2030s. that ’ s huge. to change the demographic trends, promoting birth is not enough, is also has to be done through immigration, if this is to be corrected. if not, we ’ re creating a great difficulty to growth and to the welfare of future generations. this is a very acute problem because for years europe has been doing the sort of collective demographic suicide and no one is thinking about this. in the short term, the backlash against immigration has been dramatic

channel. conversely, forward guidance may affect the term premium component of longer - term yields by reducing the uncertainty about the future path of short - term interest rates and thereby reducing duration risk in the market. accordingly, the net stimulus provided by asset purchases depends in part on expectations of how policymakers will adjust short - term interest rates in the future. but these additional complexities do not alter, and in fact reinforce, the key insight – namely that the different policy tools must be seen as mutually complementary elements of a package. the sequencing between policy tools, as we have described it in our forward guidance since march 2016, with rates expected “ to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases ”, is motivated by this insight. for example : letting the expectations component of longer - term yields float upwards while, at the same time, engaging in asset purchases would be an inefficient conduct of policy. the compression of yields through the asset purchases would be directly countered by an upward drift in the expectations component. by contrast, the established sequencing helps anchor the expectations component and thereby allows the app to exert its full effect. 8 / 10 bis central bankers'speeches calibrating app while fostering the appropriate interest rate environment is a critical intermediate condition enabling the transmission of our policies, in the end we do not directly control the yield curve. we can influence the yield curve only indirectly, through forward guidance and, notably, via modulating the size and intensity of our asset purchases. this process is mediated and to some extent difficult to forecast : we change our instruments and let markets determine the asset price implications of our actions. but, importantly, this process preserves the ability of markets to express views about the creditworthiness of the financial assets that are to be priced. indeed the last year has demonstrated that, despite the ecb ’ s forward guidance on short - term interest rates and its continuing presence in the market as a large investor, market prices have tended to reflect investors ’ evolving views about the prospective standing of sovereign issuers ’ credit. with this in mind, let me turn now to the challenge of calibrating the size and duration of purchases that can deliver that yield constellation and, indirectly, the set of financing conditions consistent with our objective. for this, we rely on the current theory and empirics of quantitative interventions by central banks. the theory available today stipulates that it is primarily by announcing that