that “ some modest withdrawal of monetary policy stimulus will likely be required, consistent with achieving the 2 per cent inflation target. the timing and degree of any such withdrawal will be weighed carefully against global and domestic developments, including the evolution of imbalances in the household sector. ” our current guidance indicates that some policy action may be necessary, encouraging a degree of prudence in household borrowing. the share of new fixed rate mortgages has almost doubled to 90 per cent this year, reflecting the combination of attractively priced fixed - rate mortgages and the tightening bias of the bank of canada. guidance as an unconventional policy tool while the bank believes it appropriate to be sparing in forward policy guidance under ordinary circumstances, the calculus changes under extraordinary ones. when conventional monetary policy has been exhausted at the zero lower bound ( zlb ) on nominal interest rates, the additional stimulus that is likely to be called for is impossible to achieve using the conventional interest rate tool. extraordinary forward guidance is one unconventional policy tool, along with quantitative easing and credit easing. 14 the bank of canada used extraordinary forward guidance in april 2009, when the policy interest rate was at its lowest possible level and additional stimulus was needed. at the time, we committed to holding the policy rate at that level through the second quarter of 2010, conditional on the outlook for inflation. in effect, we substituted duration and greater certainty regarding the interest rate outlook for the negative interest rate setting that would have been warranted but could not be achieved. the bank ’ s conditional commitment succeeded in changing market expectations of the future path of interest rates, providing the desired stimulus and thereby underpinning a rebound in growth and inflation in canada ( chart 3 ). 15 when the inflation outlook – the explicit condition – changed, the path of interest rates changed accordingly. bank of canada, renewal of the inflation - control target, november 2011. bank of canada, “ framework for conducting monetary policy at low interest rates, ” mpr, april 2009. see z. he, “ evaluating the effect of the bank of canada ’ s conditional commitment policy, ” discussion paper no. 2010 – 11, bank of canada, 2010 ; and m. woodford “ methods of policy accommodation at the interest - rate lower bound, ” paper presented at the jackson hole symposium, “ the changing policy landscape, ” 31 august – 1 september 2012. bis central bankers ’ speeches our conditional commitment worked because it was exceptional, explicit and anchored in a highly credible inflation - targeting framework. it also worked

inflation rates are foreseen to rise further during 2016 and 2017, supported by the expected economic recovery, the pass - through of past declines in the exchange rate, and, assuming current prices in futures markets materialise, somewhat higher oil prices in the years ahead. the governing council will continue to closely monitor the risks to the outlook for price developments over the medium term, in particular risks related to the pass - through of the monetary policy measures as well as global economic, financial, commodity price and exchange rate developments. our monetary policy continues to aim to safeguard price stability. since mid - 2014 we have taken a number of both conventional and unconventional measures to address the heightened risks of too prolonged a period of too low inflation, encompassing targeted longer - term refinancing operations ( tltros ), a third covered bond purchase programme ( cbpp3 ) and an asset - backed securities purchase programme ( abspp ). in january 2015, an expanded asset purchase programme ( app ) was launched. the app continues to proceed smoothly and – together with other monetary policy measures – has a favourable impact on the cost and availability of credit for firms and households, contributing to the euro area recovery and a gradual rise in inflation. we intend to purchase private and public securities until the end of september 2016, or beyond if necessary, and, in any case, until we bis central bankers ’ speeches see a sustained adjustment in the path of inflation that is consistent with our aim of achieving inflation rates below, but close to, 2 % over the medium term. in the light of renewed risks that have emerged on the back of recent developments in global and in financial and commodity markets, we are closely monitoring all relevant incoming information and are ready to use all the instruments available within our mandate to act, if warranted, in particular by adjusting the size, composition and duration of the asset purchase programme. since the peak of the crisis, the euro area has made significant progress towards sound public finances and implementing structural reforms. given the high structural unemployment level and low potential output, the ongoing cyclical recovery should be supported by effective structural policies. further product market and labour market reforms, and, in particular, actions to improve the business environment, which should include an adequate public infrastructure, are of the essence and need to gain momentum across the euro area countries. such reforms will increase productive investment, boost job creation and raise productivity, while increasing the adjustment capacity and resilience of the euro area economies to global shocks. fiscal policies should