inflation. at the same time, global headwinds have undisputedly accelerated, and uncertainty has increased, mainly related to the rising threat of protectionism. in this environment, the governing council last week extended its forward guidance on rates and now expects them to remain at their present levels at least through the first half of 2020, 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. we have also announced the technical parameters governing tltro iii. 13 / 14 bis central bankers'speeches the governing council is determined to act in case of adverse contingencies and stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards the governing council ’ s inflation aim in a sustained manner. thank you. 1 of course, such models cannot differentiate between different policy instruments. but the effects of policy tightening or easing should, in principle, have similar effects on asset prices across the central bank ’ s toolkit. 2 see cœure, b. ( 2018 ), “ the persistence and signalling power of central bank asset purchase programmes ”, speech at the 2018 us monetary policy forum, new york city, 23 february. 3 for example, swap dealers use positions in bunds to hedge interest rate risk on swaps. 4 the phasing in of banks ’ liquidity coverage ratio and net stable funding ratio is also likely to have contributed to this secular effect. 5 ecb staff have further refined and expanded the methodology used to calculate the bond free float for the aggregate of the four largest euro area countries that together account for around 80 % of euro area sovereign debt and gdp. there are a number of methodological differences and enhancements compared with the bond free float shown in cœure ( 2018 ), op. cit. the new measure is based on security - level information from the quarterly securities holdings statistics. these data are only available from the last quarter of 2009 but allow for a more granular analysis that also takes into account holdings by other less price - sensitive investors, such as insurance companies and pension funds. total outstanding debt relates to general government debt and not to the central government. estimates for the euro area bond free float proxy are naturally higher than for germany as foreign exchange reserves are predominately held in german bunds. for more detail, see eser, f., lemke, w., ny

impact of increases in oil prices, and more recently elevated food prices shows that ignoring the structural or permanent elements of what is traditionally treated as shocks may slow down appropriate monetary policy response especially if the focus is on " core inflation ". accounting for house rents / prices in inflation measurement has also gained attention in some countries. the central banks are often concerned with the stability / variability of inflation rather than the level of prices. inflation processes have become highly unclear and central banks are faced with the need to recognise the importance of inflation perceptions and inflation expectations, as distinct from inflation indicators. in this context, credible communication and creative engagement with the market and economic agents have emerged as a critical channel of monetary transmission. challenges for emerging market economies it is essential to recognize that the international financial markets have differing ways of judging macroeconomic developments in industrial and emerging market economies. hence, the challenges and policy responses do differ. first, the emes are facing the dilemma of grappling with the inherently volatile increasing capital flows relative to domestic absorptive capacity. consequently, often the impossible trinity of fixed or managed exchange rates, open capital accounts and discretion in monetary policy has to be managed in what could be termed as “ fuzzy ” manner rather than satisfactorily resolved – a problem that gets exacerbated due to huge uncertainties in global financial markets and possible consequences in the real sector. second, in the emerging scenario of large and uncertain capital flows, the choice of the instruments for sterilization and other policy responses have been constrained by a number of factors such as the openness of the economy, the depth of the domestic bond market, the health of the financial sector, the health of the public finances, the country ’ s inflationary track record and the perception about the credibility and consistency in macroeconomic policies pursued by the country. further deepening of financial markets may help in absorption of large capital inflows in the medium term, but it may not give immediate succour at the current stage of financial sector development in many emes, particularly when speed and magnitude of flows are very high. some of the emes are also subject to adverse current account shocks in view of elevated commodity prices. going forward, global uncertainties in financial markets are likely to dominate the concerns of all monetary authorities, but, for the emes, the consequences of such macro or financial disturbances could be more serious. third, the banking sector has been strengthened and non - banking intermediation expanded providing both stability and