2 % for quite some time, moderating only gradually in 2009. we are thus currently experiencing a protracted period of high annual rates of inflation, which is likely to be more persistent than anticipated some months ago. risks to price stability at the policy - relevant medium - term horizon remain clearly on the upside and have increased further over the past few months. these risks include notably the possibility of further increases in energy and food prices. there is also a very strong concern that price and wage - setting behaviour could add to inflationary pressures via broadly based second - round effects. the governing council is monitoring price - setting behaviour and wage negotiations in the euro area with particular attention. furthermore, there are potential upside risks from unanticipated rises in indirect taxes and administered prices. against this background, it is imperative to ensure that medium to longer - term inflation expectations remain firmly anchored at levels in line with price stability. the shift in relative prices and the related transfer of income from commodity - importing countries to commodityexporting countries have to be accepted. they require a change in the behaviour of companies and households. therefore, broadly based second - round effects stemming from the impact of higher energy and food prices on price and wage - setting behaviour must be avoided. all parties concerned, in both the private and the public sector, must meet their responsibilities in this regard. in this context, the governing council is concerned about the existence of schemes in which nominal wages are indexed to consumer prices. such schemes involve the risk of upward shocks in inflation leading to a wage - price spiral, which would be detrimental to employment and competitiveness in the countries concerned. the governing council therefore calls for such schemes to be avoided. the monetary analysis confirms the prevailing upside risks to price stability at medium to longer - term horizons. in line with our monetary policy strategy, we take the view that the sustained underlying strength of monetary and credit expansion in the euro area over the past few years has created upside risks to price stability. over recent quarters, these risks appear to have become manifest as inflation has trended upwards. against this background, the continued strength of monetary dynamics represents an important signal of the risks to price stability over the medium term that we have been addressing through our actions since end - 2005, including today ’ s move. more specifically, annual m3 growth has remained very vigorous in recent months, supported by the continued strong growth of mfi loans to the private sector. although annual m3 growth of still above 10 % overstate

crisis or towards the end of last year, can cause the spread to widen. but such episodes are typically short - lived and reverse as investors reduce their demand for safe assets. in other words, we would expect the bund - ois spread to be fairly constant, on average. but the fact that the spread has been gradually and persistently widening over time suggests that it is not being driven by common factors, but rather by factors specific to the bund market since about the start of 2015. the most plausible candidate for this kind of secular effect is supply - demand effects induced by a shrinking bond free float. 4 you can see that, according to new ecb staff estimates, only a little more than a third of outstanding general government bonds of the four largest euro area countries are currently in the hands of private price - sensitive investors. 5 before the app was launched, more than half of these bonds were held by these investors. and by rolling over our bond portfolio, we keep removing duration risk from the market. you can see this on my next slide. in germany, for example, pspp reinvestments in central government bonds this year and next are expected to still absorb nearly 30 % of gross issuance. in some countries, like france and italy, reinvestments as a share of total gross issuance are expected to 4 / 14 bis central bankers'speeches rise in 2020. the implication of this is that the stock effect of our purchases will continue to be significant, as you can see on my next slide. two years from now, the stock of acquired assets is still estimated to compress the ten - year term premium in the four largest euro area government bond markets by some 70 basis points. the main reason why the effect gradually becomes smaller in the coming years is due to the mechanical ageing of the portfolio. 5 / 14 bis central bankers'speeches it is also easy to see now why the concerns that many have voiced regarding the potential impact of our intention to reduce deviations from the ecb ’ s capital key have not materialised. 6 put simply, these adjustments in our purchases are too small to have a significant effect on yields. on my next slide you can see the progress we have made so far this year in reducing the overall sum of absolute deviations from the capital key across all euro area countries. it is interesting to see that the introduction of the new capital key in itself contributed to a one - off reduction in overall deviations. this is