area is no exception. here, inflation is even in negative territory ; in may, prices were down by 0. 1 % on the year. in the past two years, it was mainly the sharp fall in commodity prices, particularly oil prices, which pushed inflation down. however, the impact of a change in oil prices will automatically be washed out of the inflation rate over time. and the recent rise in oil prices is helping to speed up this process somewhat. however, the low inflation rates in the euro area are not just an outcome of the fall in oil prices. core inflation, i. e. the price index adjusted to exclude energy and food prices, is likewise relatively low. the muted domestic price pressures measured in this manner also show that some euro - area economies are recovering only gradually and that unemployment levels in those countries are still very high. seeing as the euro - area economic recovery is only tepid, the eurosystem projections foresee no more than a gradual increase in inflation to 1. 3 % next year and 1. 6 % in 2018. in view of this muted price outlook, an accommodative monetary policy is appropriate at present, though reasonable people can disagree about the specific design of the non - standard measures. there is one thing i would like to stress, though : our definition of price stability requires the target inflation rate to be achieved over the medium term. this will give us enough time to see how the adopted monetary policy measures will impact on price movements, especially since, as i have been pointing out time and again, the eurosystem is still something of a novice when it comes to applying non - standard monetary policy, and the risks and sideeffects of the ultra - accommodative monetary policy are growing over time. bis central bankers ’ speeches 4. conclusion ladies and gentlemen, i have covered a wide range of themes : from cash to confidence in currency to monetary policy. however, i do not wish to unduly tax your attention span, for, as the saying goes, a good speaker can talk about anything – as long as it ’ s about 20 minutes or less. you still have an exciting programme ahead of you today. i hope you enjoy the interesting talks we ’ ve lined up for you and have a stimulating exchange of views. thank you very much! bis central bankers ’ speeches

years ”. another example is housing, where prices are unlikely to return soon to the pre - crisis levels, especially in some countries. also in this sector profit margins are likely to be lower and so will investments and employment. excess supply and debt might require years before being absorbed again, as shown in the early 2000s after the burst of the high - tech bubble. other sectors which could be downsized in a permanent way are those in which technology turned out to be out of pace with medium term trends in energy prices. another grave side of the current crisis – which was also largely unpredicted – is the collapse of international trade, which has brought the process of economic integration backwards, some sort of de - globalization. this has hit exports and imports of all countries, in a rather brutal way, with multiplier effects on investment, consumption and employment. the sectors which have been more seriously hit are those that were more exposed to international competition, which had grown strongly over the recent years thanks to the global integration of production processes. those countries which relied most on exports and manufacturing production have been hit hardly by a crisis which had originated in the financial sector. according to some estimates, around 90 % of world trade was partially or totally supported by financial instruments, which in the past years had also experienced a rapid process of innovation. the crisis of confidence which burst after the failure of lehman brothers, stopped financial flows, especially those between agents located in different countries which are less acquainted with each other and base their transactions on market - based liquid and sophisticated credit instruments, which are however also riskier. the reflow of capital towards the major financial centres and the de - leveraging process, which started in the second half of september 2008, has induced banks to reduce their non - core activities. export credit, which consists in financing not only the export company but also the foreign importer which buys from the exporter, entails higher risks than domestic activities. credit lines with foreign counterparties, which require a greater use of capital, tend to be reduced, especially for small and medium size enterprises and towards emerging markets. we are observing recently that trade finance is going back to simpler instruments, such as documentary credit and confirmed letters of credit, which substantially reduce risk. the link between financial integration and trade integration has been the transmission mechanism through which the loss of confidence in the financial system has spread to the real economy, and from the country where the crisis started to the rest of the world. this implies