of immediate difficulties, we will pay a higher price in the future. fellow members of the bank of korea! i would like to talk now about some of the things that our bank will have to focus on carrying out from the second half of this year. in our monetary policy operations, we will work to ensure that stable growth is sustained and inflation converges to its target over a medium - term horizon, while paying close attention to financial stability. considering that uncertainties about external factors have heightened significantly, especially with respect to the us - china trade dispute and the semiconductor 1 / 3 bis central bankers'speeches industry, we will act appropriately depending on changes in economic conditions while closely examining the related trends and impacts. to this end, we should formulate policy implementation strategies for various scenarios so that we can cope with changes in domestic and external conditions in a timely manner. we will also take into consideration financial stability risk factors as well, such as household debt and capital flows. we will also need to work even harder to enhance the effectiveness of our policy communication. with uncertainties growing more and more, markets are reacting sensitively to changes in economic conditions. we will accordingly need to provide more detailed explanations about the background to our monetary policy decision - making and also about changes in major risks. as inflation has remained far below its target level, we will need to examine on a regular basis how the inflation target is managed and explain in detail to enhance economic agents ’ understanding of inflation conditions. we will have to make ourselves fully prepared to cope with changes in the monetary policy environment over a longer - term horizon. major country central banks and academia have recently focused on changes in the traditional causal relationships among economic variables and monetary policy transmission channels, which have been caused by changes in the economic structure. wide - ranging discussions are also taking place about how to improve monetary policy frameworks to enhance the policy effectiveness the in the current low inflation and low interest rate environment. while looking at ongoing research and discussions in major countries, we should think carefully about which measures are applicable to korea. we will also have to devote special attention to financial and fx market stability. mounting concerns about global economic growth are keeping long - term interest rates at low levels at home and abroad. stock prices and exchange rates are also highly volatile. we will have to closely monitor changes in domestic and external risks as well as developments in financial markets, and if necessary, we should actively carry out market stabilization measures. we will also need to respond to the rapid

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