global protectionism prompted by the imposition of steel and aluminium tariffs by the united states ; rising oil prices triggered by geopolitical risks in the middle east ; and the possibility for persistent heightened financial market volatility. set against this are some risks to the upside, stemming mainly from the fiscal expansion in the united states and, more in the medium term, from likely fiscal expansions in several countries in the euro area. we will continue to monitor these developments closely. but for now, our growth expectations for the medium term remain essentially unchanged and we view the risks around that outlook as broadly balanced. outlook for wages and inflation for monetary policy, the key issue is how growth feeds into wages and then inflation. it is wellknown that the reaction of inflation dynamics to accelerating growth has been atypically slow in recent years. as i have discussed elsewhere, there are a variety of factors that could explain this, ranging from mismeasurement of slack to a changing relationship between slack and wages. 5 all this has injected quite some uncertainty into understanding and forecasting wage dynamics, which persists today. but there are signs that slack is now diminishing, and that the relationship between slack and wages is slowly re - asserting itself. different measures of slack, such as broad and headline unemployment, appear to give a similar picture of lessening spare capacity, although there is still high unemployment among specific groups and regions. 6 2 / 6 bis central bankers'speeches see szorfi, b. and toth, m. ( 2018 ) : measures of slack in the euro area, economic bulletin, issue 3, ecb. in keeping with this, the unexplained residuals in the standard wage phillips curve model for the euro area are gradually reducing, and wage growth is beginning to pick up. compensation per employee has lifted from its trough in mid - 2016 and is now growing at 1. 9 %. so far, the increase has been mainly explained by the wage drift component, which tends to react faster to cyclical improvements in the labour market. but annual growth in negotiated wages has also started to move upwards. looking ahead, recent wage agreements notably in germany, but also in other large countries such as france and spain, point to a continuation of these wages dynamics. there are signs that the restraint in public - sector wage growth, which had in the past dragged on aggregate wage growth, is starting to relax. we are seeing an increase in domestic cost pressures

app ), which include asset - backed securities ( abspp ) and covered bonds ( cbpp3 ). the pspp is a new programme for the euro area, but it can hardly be called a revolution in central banking. central banks around the world have relied on large - scale asset purchase programmes to further stimulate the economy and fulfil their mandates after hitting the zero lower bound. accordingly, when the governing council decided on 22 january to launch the pspp, it agreed unanimously that it is a monetary policy tool in a legal sense, although views differed on the timing of such a programme. in our case, the ultimate goal of these operations is to bring back medium - term inflation in the euro area to levels close to, but below, 2 %, in line with our price stability mandate. monetary policy is implemented in normal times in money markets by buying and selling short dated securities or, in the case of the ecb, by lending to banks against adequate collateral. while the ultimate goal is the same, when the lower bound is reached the actual implementation of monetary policy also has to take place in bond markets, which central bis central bankers ’ speeches banks in normal times only affect indirectly. stepping into this new domain creates certain challenges and might even have unintended consequences. these, however, should not be interpreted as constraining the effectiveness of monetary policy. but they do provide guidelines and a framework for defining the operational features of the pspp. and outlining these features is the topic of today ’ s speech. 1. transmission the pspp is designed to strengthen the impact of our asset purchases already under way. conceptually, large - scale asset purchases by a central bank may have an effect through a number of channels. first, large - scale security purchases mechanically reduce the supply of securities available in the secondary market, which results in higher prices and lower yields through the creation of scarcity. importantly, this effect is by no means limited to the individual bonds that are purchased. instead, the existence of “ preferred - habitat investors ” – agents with a preference for securities with a specific maturity – gives rise to “ local ” spillovers that also compresses the yield of bonds with a similar maturity. 1 in addition, asset purchases also reduce the overall duration risk borne by the market as securities are exchanged into central bank reserves. this lowers the interest rate risk borne by investors and accordingly affects the entire term structure, despite having a more pronounced effect on long - term bonds. 2