Thus, it is useful to complement this measure with expectations extracted from inflation derivatives. In particular, inflation-linked swap rates provide a measure of the expected inflation rates at short horizons (one and two years ahead, for example). 8 One-year inflation swap rates fell sharply in the second half of 2008 (slide 13), following the decline in oil prices and the worsened macroeconomic outlook, and remained between 0.0% and 0.5% until recently. However, they have returned to levels above 1% since early April 2009. The chart also displays market uncertainty about the future inflation outcomes in the euro area, represented by the coloured areas. Unsurprisingly, uncertainty has increased since October 2008. Furthermore, in line with developments in point expectations, the probability associated with negative inflation readings within a 12-month horizon increased in the months following October 2008, as indicated by the shaded areas below the zero line, but has declined somewhat in recent months. The evolution of the term structure of inflation expectations suggests a similar pattern of gradual adjustment at slightly longer horizons (slide 14). Two-year-ahead inflation expectations have moved in tandem with shorter inflation expectations. Yet, the fact that they have never become negative, and that they are now back at levels ‘close to, but below, 2%’ – which is the ECB’s definition of price stability – offers further ‘comfort’ for monetary policy. It should be kept in mind that the liquidity of shorter-term inflation swaps is somewhat inferior to longer-horizon contracts, and the readings should thus be interpreted with appropriate care.

As such, the global recovery will be based on trust and solidarity between nations. Is such cooperation possible? Europe is a case in point. Let´s take again the example of vaccines. When the prospect of a common vaccination pool and 2/4  BIS central bankers' speeches  the purchase of vaccines on an uncoordinated basis was aired, European institutions took the decision to cooperate. That has allowed vaccines to be provided at the same time for countries with very different production or vaccine-purchase capabilities. It is an example of cooperation worth exporting to global vaccination programmes. Another example is the case of the policies needed to tackle climate change. The European Union has pioneered a system of cross-country carbon emission rights. This mechanism, according to recent studies, has led to a reduction of more than 10% in the emissions of regulated companies.3This coordinated effort has seen the EU commit to a binding target of a net domestic reduction of at least 55% in greenhouse gas emissions by 2030 compared to 1990. It far exceeds the commitment to cut emissions by at least 40% under the Paris Agreement. Again let us view the European Union as a laboratory for what the multilateral effort can – ideally – achieve. European economic institutions: unfinished work However, in order for Europe to play this role properly, Europe should deepen its own integration project. Only by addressing the remaining challenges of our political and economic integration process, we – European – can aim to contribute decisively to global objectives.