us to ] fail to do the job and get the interest rate turn fairly soon. but the way to get the interest rate turned is not by hastening it prematurely. 8 that is our position and, as the governing council underlined today, the momentum of the euro area ’ s economic recovery continues to be supported by our monetary policy. this fosters the return of inflation towards 2 %. altavilla c., g. carboni, r. motto ( 2015 ), “ asset purchase programmes and financial markets : lessons from the euro area ”, ecb working paper no. 1864. for information on the methodology behind this analysis see praet, p. ( 2016 ), “ the ecb ’ s monetary policy response to disinflationary pressures ”, speech at the ecb and its watchers xvii conference organised by the center for financial studies, frankfurt, 7 april 2016. see the transcript of the federal open market committee meeting of march 18, 1980. bis central bankers ’ speeches we are on the right track, but we take nothing for granted either. the governing council will closely monitor the evolution of the outlook for price stability and, if warranted to achieve our objective, we will act – as we have always done – by using all the instruments available within our mandate. bis central bankers ’ speeches

i am confident that, over time, our experience with unconventional tools will fill the remaining knowledge gap. one should not forget that the ability of central banks to bring high inflation under control was also doubted in the past, most famously in the 1970s, until empirical evidence put the debate to rest. but in the meantime, central banks have to demonstrate that there is no discontinuity when interest rates reach zero – unconventional measures can work as well as conventional ones. how unconventional monetary policy works why is this the case? conventional monetary policy operates by steering real money market rates below the prevailing equilibrium real rate, which in turn stimulates demand and inflation. bis central bankers ’ speeches but when the equilibrium rate is so low that the central bank cannot bring its policy rate sufficiently below it, the capacity to increase the degree of stimulus through moving short - term rates becomes limited. unconventional tools can, however, still be effective in these conditions. this is because, in reality, there is not just one interest rate which determines saving and investment in the whole economy. there is in fact a constellation of rates, which apply to different maturities, to different types of financial instruments, to different borrowers and lenders. so even without policy rates moving much, it is still possible for the central bank to stimulate the economy by lowering the level of all those interest rates. this can be effective in any circumstances, but particularly so when risk premia have risen due to market fragmentation or unwarranted uncertainties. reflecting this broader channel of monetary transmission, we have deployed a three - pronged strategy to inject additional stimulus into the euro area economy. first, our forward guidance allows us to lower longer - term rates by steering expectations of future short - term rates. having opened up the possibility that policy rates can turn negative has also contributed to flattening the whole yield curve, by removing the upward bias to yields that came from the perception that rates could only go up, not down. indeed, we have stated unambiguously that policy rates would remain at current levels or lower for an extended period of time. second, our asset purchases help us further lower yields across maturities and asset classes by compressing risk premia in the markets where we intervene. that in turn triggers portfolio rebalancing out of those markets and brings down borrowing costs across the whole constellation of rates, thereby producing broad stimulating effect. this is complemented by the negative rate on our deposit facility, which speeds up the process of