well anchored. many elements of the normalization principles and plans are similar to the principles adopted by the committee in june 2011, while others have been revised in light of the changes since then in the size and composition of the system open market account ( soma ), the fed ’ s securities portfolio, as well as enhancements in the tools the committee will have available to implement policy during normalization. as was the case before the crisis and indicated in the june 2011 principles, the committee intends to adjust the policy stance during normalization primarily through actions that directly influence the level of the fed funds rate and other short - term interest rates rather than through active management of the size or composition of the fed ’ s securities holdings. specifically, when economic conditions and the economic outlook warrant a less accommodative stance of monetary policy, the committee will raise its target range for the fed funds rate. during normalization, the committee intends to move the fed funds rate into the target range primarily by adjusting the rate of interest on excess reserve balances ( ioer ) that it pays. we expect changes in the ioer rate to have a significant influence on the fed bis central bankers ’ speeches funds rate and other short - term interest rates. however, to help control the fed funds rate, the committee also intends to use an on rrp facility and other supplementary tools, as needed. the committee will use an on rrp facility only to the extent necessary, and will phase it out when it is no longer needed to help control the funds rate. with regard to the fed ’ s balance sheet, the committee intends to reduce securities holdings in a gradual and predictable manner, primarily by ceasing to reinvest repayments of principal on securities held in the soma. the committee expects to cease or commence phasing out reinvestments after it begins increasing the target range for the fed funds rate ; the timing will depend on how economic and financial conditions and the economic outlook evolve. the committee currently does not anticipate selling agency mortgage - backed securities as part of the normalization process, although limited sales might be warranted in the longer run to reduce or eliminate residual holdings. in the longer run, the committee intends to hold no more securities than it will need to implement monetary policy efficiently and effectively, and that the soma will consist primarily of treasury securities. given the $ 1. 6 trillion in large - scale asset purchases ( lsaps ) conducted since september 2012, the level

implies, in the words of professor issing, a “ permanent commitment ”. from this perspective, the two types of convergence are mutually reinforcing : nominal convergence provides the stable macroeconomic environment that fosters real convergence, while the latter lays the groundwork for sustainable nominal convergence by reducing the economy ’ s exposure to asymmetric shocks and containing differences in the transmission of symmetric shocks. it is, however, of the essence that the pursuit of real convergence gains should not be governed by a short - term vision, in which case they would come at the cost of macroeconomic imbalances. ii. is romania prepared for erm ii? professor issing is going to speak today about the global currency war, about whether we are indeed witnessing a genuine clash of currencies, as well as about the consequences of the massive exchange rate swings. it is a topical issue, also relevant to romania, because the reshaping of the relations among major global currencies – including on the background of the ecb ’ s recent quantitative easing – complicates the task of identifying the equilibrium exchange rate of the leu suitable for erm ii entry and thereafter for euro adoption. technically, the adoption of the single currency as of 1 january 2019 would imply joining erm ii in 2016 h1 and the minimum two - year stay. aside from the difficulty of setting the central parity, erm ii participation calls, however, for a certain preparedness of the economy as well, considering the risks inherently posed by a target - band regime. the need to minimise such risks and the requirement to fulfil the maastricht criteria by the end of the second year of erm ii participation render all the more important the completion of major economic policy adjustments ahead of adopting this exchange rate regime. i am mainly referring to removing the sources of repressed inflation ( the relevant example being the completion of the energy market deregulation ), of quasi - fiscal deficits ( by restructuring lossmaking state - owned enterprises ), as well as other sources of future budgetary pressure ( for instance, the unavoidable expenditures to modernise road infrastructure ). there are also monetary adjustments that need to be carried out ahead of erm ii entry, namely finalising the process of bringing minimum reserve requirement ratios in line with euro area levels. the large volumes implied by the cut in reserve ratios and the potential impact on the exchange rate call for a gradual approach to this process, possibly