It has been the main driver behind the remarkable increase in economic and financial integration as well as the transformation of the financial system over the past decade. It has made the euro area economically more stable for both investors and consumers. In particular, financial integration has promoted cross-border portfolio flows in the euro area and thus enabled consumers and investors to share and diversify risks. As illustrated yesterday, EMU has increased banking integration. Another interesting finding is that key policy initiatives at the European level, notably within the context of the Financial Services Action Plan, have made a significant contribution to fostering banking and regulatory integration. However, in my view, there is room for improvement, especially as regards cooperation and coordination between national supervisors and regulators in Europe. As the Vice-President emphasised in his opening address yesterday, there is a growing understanding of the need to strengthen the pan-European character of financial stability arrangements for crisis prevention and resolution. However, during the ongoing financial turmoil, the euro area and the EU as a whole have proved their capacity to act decisively and promptly under difficult circumstances. National measures have been coordinated in a pragmatic manner with a view to enhancing their effectiveness through mutual reinforcement. As regards the role of central banks in banking supervision, recent tensions in financial markets have confirmed that close cooperation and active exchanges of information between central banks and supervisory authorities are indispensable. In particular, the financial turmoil has revealed areas in which cooperation could be strengthened.

In addition, the severe supply-chain bottlenecks that initially affected this category began to improve last year, which likely contributed to the easing of prices for some durable goods in recent months. However, there are factors that may throw sand in this gear going forward. The economic resiliency of Europe and a rebound in growth in China following the end of COVID restrictions will likely increase global demand for goods. And further improvement in global supply-chain disruptions has stalled over the past few months. For example, the New York Fed's Global Supply Chain Pressure Index remains elevated relative to pre-pandemic levels. The slowest gear to turn is the one that represents non-energy services. It's influenced by the balance of overall supply and demand, and it will take the longest to rotate at the right pace for low and stable inflation. One area where we are seeing signs of this gear turning is in shelter costs. After a sharp rise, we have seen a steep decline in the rate of increase in new lease rents. Assuming this trend continues, we should see a slowing of overall rent inflation during this year. That said, we have yet to see the gears turn for inflation of non-energy services excluding housing, which is still quite elevated, averaging 3-3/4 percent over the most recent six months. Tightening Monetary Policy Taking into account the different speeds the gears are moving, it is clear that overall demand remains well in excess of supply, and inflation is running far above our 2 percent target.