Similarly, “breakeven inflation” measures derived from inflation-indexed Treasury securities are based on the CPI and include time-varying risk and term premiums in addition to expectations of inflation.8 To address the lack of direct comparability of different measures of inflation expectations, I compare readings over the past two years to the levels observed during 2014-2020, after the FOMC’s announcement of a 2 percent long-run goal and before the onset of rising inflation in the spring of 2021. The level of longer-run expectations in the SPF has consistently stayed very close to the FOMC’s 2 percent goal. The other measures have generally stayed within pre-pandemic ranges, with most recent readings only slightly higher than corresponding average levels from 2014-2020. The upper portion of Table 1 provides statistics on these comparisons. Interestingly, during the period of sustained low inflation before the pandemic, the market-based and Michigan measures declined, and their current levels are similar to those seen prior to that decline. Assessment of the uncertainty criterion for well-anchored inflation expectations is more challenging given data limitations. In theory, prices on inflation options contracts could be used to infer investors’ distributions of beliefs about future inflation.9 However, there have been virtually no trades recorded in the U.S. market for inflation caps and floors since 2015. Over that time, the “prices” reported for these options were based on models—not transaction prices—and cannot be used to measure investors’ inflation uncertainty during the current episode.

On the other hand, the growing interconnection and internationalisation of infrastructures result in new kinds of transmission channels (often cross-border), through which the credit or liquidity problems of individual market participants can spread to other participants. In the new environment, operational problems experienced within individual financial market infrastructures can also spread much more rapidly to a larger number of players. A working group is currently dealing with precisely these issues. It was set up by the Committee on Payment and Settlement Systems (CPSS) of the Bank for International Settlements (BIS) and one of the participants is the SNB. What is already clear is that the advantages of internationalisation clearly outweigh the drawbacks so far. Any threats to financial stability would have to be countered by modifications to the systems’ architecture, the applicable rules and oversight. BIS Review 123/2006  1  Tentative adjustment to market developments While financial market infrastructures were internationalised quite rapidly, they repeatedly lagged behind the deregulation of the financial markets. In today’s environment, it is possible for innovative financial products to gain popularity quickly and to achieve enormous trading volumes shortly after their introduction. A recent example is the rapid growth in the market for credit derivatives. While the trading volume of credit derivatives absolutely exploded in the last decade, the efficiency of the transaction confirmation and settlement processes for a long time left much to be desired. As a consequence, the backlog of concluded, yet unconfirmed transactions grew steadily.