. for now, the growth perspectives remain strong in the us, as confirmed by recent robust labour market data, and option - implied distributions of inflation expectations show upside risks to inflation. in that context, markets expect the fed to cut interest rates less this year than previously anticipated. the expectations component is estimated to account for about two - thirds of the increase in the 10 - year treasury yield since mid - september. page 4 sur 6 the macroeconomic picture is different in the euro area. the disinflation trajectory is more clear - cut and the macro outlook is weaker. the contagion to european yields from higher us interest rates has thus been limited so far : monetary policy perspectives could and should rightly decouple. but spillovers on the bond markets operate also through the global risk channel. in a more uncertain global environment, investors require higher compensation for lending long term, which results in higher term premia. the contribution of the term premium to the change in ois 10 - year rates since mid - september is almost 15 bp. the impact of this rise in the term premium on financial conditions in the euro area is however mitigated by the depreciation of the euro / dollar exchange rate which has occurred during the same period. c ) the role of unwinding qe shouldn ’ t be overstated some commentators argue that the end of qe has contributed to the rise in long - term yields. this interpretation goes back to the initial objective of qe. asset purchase programmes were launched in times of crisis and when rates were at the effective lower bound ( elb ) for two reasons : 1 ) to preserve an effective monetary policy transmission when specific market segments were under strain – which is not relevant today, and 2 ) to provide additional policy space when required ( i. e. monetary stance purpose ). in that latter case, purchases of long - term bonds aimed at compressing the term premium and therefore the long term yields, to stimulate aggregate demand. in principle, “ quantitative tightening ”, i. e. the full unwinding of all large scale asset purchases would drive the market back to the status quo ante. but there page 5 sur 6 are two reasons to discount this ; and the wording itself of “ qt ” is somewhat misleading. first, passive and bounded “ qt ” is not the symmetric of active and open - ended qe : qe ramped up quickly but unwinds much more slowly. recent research i finds

system, all too often has contributed to conceal the true level of leverage and risk. it may be that, as in other economic activities, innovation in finance will inevitably entail increasing complexity. in most cases, whether we think of the pharmaceutical industry or big utility networks, the risks attached to this complexity have been identified and mastered. this may be more difficult when human behavior is directly involved, as in financial or epidemiological systems, thus adding another, and different layer of complexity. both the industry and regulators will have to rise up to this formidable intellectual and operational challenge and i am convinced that your conference to day will provide invaluable help in this regard. thank you. references caballero, krishnamurty " collective risk management in a flight to quality episode " the journal of finance vol. lxiii, no. 5, october 2008. caballero, simsek : complexity and financial panics, nber working paper 14997, may federal reserve bank of new york " new directions for understanding systemic risk " economic policy review volume 13, number 2, november 2007. gorton : the panic of 2007. paper presented at the economic symposium of the federal reserve bank of kansas city. jackson hole. august 2008. haldane andrew : " rethinking the financial network ", speech delivered at the financial student association, amsterdam, april 2009 ( available on the boe website ). kashyap, rajan, stein : " rethinking capital regulation ", paper prepared for federal reserve bank of kansas city symposium on “ maintaining stability in a changing financial system ”, jackson hole, wyoming, august 21 - 23, 2008. landau : “ extreme events in finance : some reflexions ”, remarks at the conference on extreme events jointly organised by the banque de france and toulouse school of economics ( tse ), september 3, 2008.