inflation expectations may become detached from price stability must not be underestimated. this is a nonlinear process, capable of materializing suddenly. bis central bankers ’ speeches for this reason, the ecb ’ s governing council has reaffirmed its intention to maintain an accommodative monetary policy stance for as long as necessary and has firmly reiterated that policy rates will remain at present or lower levels for an extended period. in line with its mandate, the council will use all the tools needed to keep actual and expected inflation in line with the definition of price stability in the medium term. sovereign debt the narrowing of the spread between ten - year btps and german bunds to about 200 basis points, the level recorded in july 2011, reflects the abatement of the risk of a euro - area break up and strengthening market confidence. upward pressures on global interest rates stemming from the consolidation of the recovery or from international turbulence cannot, however, be ruled out ; only a return, including in italy, to sustained growth can offset such pressures, by favouring a further reduction of the component of sovereign bond yield differentials due to different trends in the fundamentals. hard - won confidence must not be undermined by the resurgence of fears about the determination of italy, and of all the countries of the euro area, to continue on the path of reform and responsibility. failure to do so would hinder the improvement of the conditions of access to credit, with inevitable repercussions on the cost of capital and investment by firms. the path ahead is a narrow one, and in taking it due consideration must certainly be accorded to the needs of those who are suffering the most as a result of the long crisis and the major changes accompanying the opening of markets and the rapid emergence of new technologies, changes for which most of the necessary structural adjustment is still incomplete. observance of budgetary constraints does not only stem from formal obligations ; it is what guarantees full access to the financial markets for the treasury. in 2013, the public sector borrowing requirement amounted to around €80 billion. including the rollover of maturing debt, the treasury ’ s annual recourse to the markets is on the order of €400 billion. net foreign purchases of italian government securities, in particular by institutional investors, began to show signs of recovery in mid - 2012, and continued through 2013. but the confidence of foreign investors, at times summarily dismissed as “ speculators ”, can be very quickly undermined

understanding of the relationship of monetary policy to inequality has lagged behind the mounting political debate on the issue. bernanke ( 2015 ) proposed a simple “ litmus test ” to cut through our difficulties in forming a complete picture of the effects of qe : “ if the average working person were given the choice of the status quo ( current fed policies ) and a situation with both a weaker labour market and lower stock prices ( tighter fed policies ), which would he or she choose? ” this question would appear to offer a fitting background to our discussion here today. 3. inequality in a monetary union in the euro area, the debate has stressed another potential distributional spillover of monetary policy : redistribution of resources not only within countries but also between the member states of the monetary union. naturally, the effects of monetary policy on the member states may well be asymmetric, and very strong views on the way the asymmetry works in this particular case have been expressed. to cite one : “ while households in countries strongly affected by the crisis are relieved, others, namely german households, are suffering from the very same measures. ” 16 to the extent that within the cross section of households an expansion produces winners and losers and that these are unevenly distributed across countries, monetary policy may of course also reallocate resources across national borders. to be sure, in a fully integrated economic union this would not be an issue. in the euro area it might be, though, because the lack of a common fiscal policy framework means there are no tools to neutralise the potential distributional effects of mp. however, the concerns about the redistributional effects of monetary expansions across euro - area countries reflect an oversimplified representation of the monetary policy transmission mechanism. in fact, understanding these cross - country effects is, if anything, even harder than grasping within - country effects. one difficulty is simply measurement. the data are not comparable across countries because of differences in the definitions of income and wealth, the way taxes are treated, the primary sources used, and often the processing of the data. measuring income and wealth consistently in a large economic area is not easy. 17 and where the status quo itself is measured inaccurately, gauging the impact of a shock ( monetary or otherwise ) becomes problematic at best. 18 “ britain ’ s richest 5 % gained most from quantitative easing, ” the guardian, 23 august 2012. holzhausen and sikova ( 2014 ). the statistical traditions of european countries