translate more convincingly into stronger inflation dynamics. as i reported already in the past, deflation risks have essentially disappeared. nevertheless, measures of underlying inflation have picked up only moderately over recent months. headline inflation, which was 1. 5 % in august, is expected to temporarily decline towards the turn of the year, driven mainly by base effects in the energy component. afterwards, it is expected to pick up gradually, reaching 1. 5 % in 2019, according to the ecb staff projections. 1 / 4 bis central bankers'speeches overall, we are becoming more confident that inflation will eventually head to levels in line with our inflation aim, but we also know that a very substantial degree of monetary accommodation is still needed for the upward inflation path to materialise. moreover, we still see some uncertainties with respect to the medium - term inflation outlook. most notably, the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium - term outlook for price stability. we therefore need to be patient and persistent. an upward adjustment of headline inflation that is durable and self - sustained requires a further absorption of economic slack. this, in turn, still requires a very ample degree of monetary policy accommodation. with this in mind, we will decide later this year on a re - calibration of our instruments that maintains the degree of monetary support that the euro area economy still needs to complete its transition to a new balanced growth trajectory characterised by sustained conditions of price stability. the corporate sector purchase programme the package of monetary policy measures that we have phased in sequentially since june 2014 has led to a significant easing in financing conditions. what is very apparent today, and very difficult to dispute, is that this monetary policy impetus is increasingly leading to stronger economic activity, higher incomes and better employment prospects for people in the euro area. one key factor has been our ability to activate non - standard instruments that can transmit additional stimulus to the productive sector. in fact, transmission through the banking system has become increasingly effective since we began adopting credit - easing measures. i am referring here specifically to the expanded asset purchase programme ( app ), but a similar case can be made for our targeted longer - term refinancing operations. at the request of the committee, let me focus on one component of the app, namely the cspp. together with the purchase of asset - backed securities and covered bonds, the cspp represents an important credit - easing component of the

with a special focus on the mark - to - market approach given its potentially pro - cyclical effects. • strengthen capital adequacy : supervisors did not adequately account for the risks associated with new complex financial instruments. some financial engineering in recent years focused on repackaging weak credits into high - rated securities, receiving a favourable risk weighing for capital adequacy standards. the respective prudential norms and rating schemes should be reassessed also with a view to make the financial instruments less complex. the o & d business model of financial intermediation should not disappear but it should become more transparent. it should also be considered whether the originator should always keep a certain percentage of an offloaded credit package on the own balance sheet. in order to increase the capital buffers that banks need to hold with regard to illiquid structured products and off - balance sheet activities, the capital adequacy provisions within the basel ii framework should be also enhanced in these areas. vi. conclusions the current global financial distress and the economic downturn pose challenges of a significant and unprecedented nature to the ecb, other central banks and policy makers around the globe. during the financial turmoil the euro area, the monetary union and its institutional set up have proved their resilience and the capacity to act decisively and promptly. national measures have been co - ordinated in a pragmatic manner with a view to enhancing their effectiveness through mutual reinforcement. all this is not self - evident. we should not forget how europe would look today without the euro. the euro area countries would be significantly worse off. multiple crises would arise simultaneously : currency crises would go hand in hand with banking crises and real economy disruptions at country level, potentially ending up in political tensions between countries. by eliminating the exchange rate channel, the euro has mitigated the risk of contagion stemming from national economic or financial crises. in this sense, the euro has been a very important stabilising element in difficult times.