normalisation path, euro area financial conditions remain consistent with continued progress towards our policy objective. finally, our app portfolio and our unconstrained provision of liquidity will continue, for the time being, to provide an accommodative environment. 11 / 12 bis central bankers'speeches i would like to make a final comment on the effects of our app portfolio on bond yields. while, overall, our app portfolio will continue to exert downward pressure on euro area long - term interest rates, other factors such as economic fundamentals and the creditworthiness of issuers, as assessed by market participants, remain key determinants of the levels of bond yields and spreads. conclusion the winding - down of net asset purchases is not tantamount to a withdrawal of monetary policy accommodation. the ongoing rotation from net asset purchases towards enhanced forward guidance on key ecb interest rates has preserved the ample degree of monetary policy accommodation that is necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 % over the medium term. prudence, patience and persistence will continue to inform our policy decisions. the sizeable stock of acquired assets and the associated reinvestments, as well as the strong anchor for policy rate expectations provided by our enhanced forward guidance, will continue to deliver the monetary policy stimulus necessary for inflation convergence. in any event, all our policy instruments can be adjusted to ensure that inflation moves towards our aim in a sustained manner. 1 this speech builds on my remarks at the ubs conference, london, 13 november 2018. 12 / 12 bis central bankers'speeches

measures of underlying inflation remain generally muted, they have been increasing from earlier lows, amid high levels of capacity utilisation and tightening labour markets. looking ahead, underlying inflation is expected to increase further over the medium term, supported by our monetary policy measures, the ongoing economic expansion 5 / 12 bis central bankers'speeches and rising wage growth. overall, though, significant monetary policy stimulus is still needed to support the build - up of domestic price pressures and headline inflation developments over the medium term. the rotation from the asset purchase programme to forward guidance on rates at our june monetary policy meeting, we initiated a rotation of our policy instruments from the asset purchase programme towards more conventional instruments of monetary policy – the policy interest rates and forward guidance on their likely evolution. we expressed our anticipation of a gradual winding - down of net asset purchases, subject to incoming data confirming our outlook for inflation. and we updated and enhanced our forward guidance on the path for interest rates, which is now expressed in terms of the expectation that key ecb interest rates will remain at their present levels “ at least through the summer of 2019 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 ”. in addition, we re - affirmed our intention to reinvest principal payments from maturing securities purchased under the app “ for an extended period of time after the end of our net asset purchases and, in any case, for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation ”. this combination of policy measures aimed to preserve the degree of monetary accommodation that is necessary to ensure sustained convergence of inflation towards our aim. clearly, the end of net asset purchases is not tantamount to a withdrawal of monetary policy accommodation. the rotation from net asset purchases towards our conventional monetary policy instruments, together with our stock of assets and the related reinvestment policy, ensure an ample degree of monetary policy accommodation. in particular, our enhanced rate forward guidance provides a strong anchor for policy rate expectations. and the reinvestment policy will ensure that the favourable liquidity conditions and duration extraction associated with the large stock of assets on our balance sheet remain in place for a long period and thereby exert downward pressures on term premia. the mechanisms underlying the combination of instruments are duration extraction, liquidity creation and expectation management. starting with duration extraction, our reinvestment policy implies that the bonds we