estimates of euro area inflation - risk premia based on socalled macro - finance and affine models of the term structure of interest rates. if corrected for such premia, long - term inflation expectations derived from breakeven inflation rates appear to be fully consistent with those derived from survey data and in line with our definition of price stability ( as shown in chart 13 ). finally, i would like to point out that the credible commitment of the ecb to price stability and the effective communication of its readiness to act when necessary to achieve this objective have favourably influenced inflation expectations during certain periods, without making it necessary to change the policy stance in response to shocks or temporarily deteriorating expectations. 9 this is illustrated in chart 13, which shows that inflation expectations, as measured by the consensus inflation forecast as well as by the five - year forward breakeven inflation rate, adjusted to take into account the inflation - risk and liquidity premia, have remained firmly anchored or have rapidly converged to price stability, even during the two - year period when the policy rate of the ecb remained unchanged. in that period, however, the ecb made it clear that it was exercising “ strong vigilance ” and was ready to act to secure price stability. more recently, since last december, and despite the anchoring of inflation expectations, policy rates have been steadily adjusted in the light of our assessment of the upside risks to price stability over the medium term. the credible commitment of policy must be preserved by action when this is warranted by the assessment of potential inflation risks over the medium term. see orphanides and williams ( 2002 ). see brainard ( 1967 ) and also, inter alia, orphanides and williams ( 2003 ) and ( 2006 ). these included, in addition to sizeable and persistent oil shocks, the effects of the cash changeover to the euro banknotes and coins, indirect tax increases, etc. see trichet ( 2005 ). vi. concluding remarks “ nothing endures but change, ” heraclitus observed more than 2, 500 years ago. his observation is still valid today. however, what is particular about the past decade and half is the acceleration of the rate of change coupled with the all - encompassing nature of the change. globalisation, technological advances, and financial innovation are altering economic relationships at an unprecedented pace. in such an environment of continuous and rapid change, it is vital that certain key values remain stable : one of these is the real

jean - claude trichet : the governance of globalisation speech by mr jean - claude trichet, president of the european central bank, at the bocconi university and corriere della sera international forum 2008, milan, 12 may 2008. * * * it is a great pleasure to be here today at this forum and i wholeheartedly thank mario monti for having invited me. after presenting some key features of globalisation, i would like to discuss their implications for inflation and monetary policy, as well as issues related to the governance of globalisation at the international level. globalisation, while frequently quoted in many circles, is a rather broad concept open to many definitions. to my mind, a succinct general characterisation of globalisation in the current context can be thought of as essentially consisting of two main elements. first, globalisation involves the entrance of new participants into the global market - place. on this count, there has been a significant expansion in global productive capacity over the last decades. this has come through the opening up of emerging economies to international trade and production, notably the greater involvement of emerging asia in world trade, as well as central and eastern europe following the collapse of the soviet union. on the basis of one measure, an export - to - gdp weighted labour force, the effective global labour supply quadrupled between 1980 and 2005, with much of the increase having occurred since 1990. 1 the second main element of globalisation is the growing interdependence between both existing and new participants via trade, production and financial market linkages. trade in goods and services has effectively doubled over the last 20 years, with world imports and exports of goods and services as a share of world gdp having increased from 33. 9 % of world gdp in 1986 to 60 % of world gdp in 2006. the increase in interdependence on the financial side has been even more impressive, with the share of gross international asset holdings in world gdp – which provides a measure of financial openness – having exhibited an eightfold increase over the last 25 years ; now standing at more than 130 % of world gdp. indeed, global cross - border capital flows have been growing at an extremely robust pace over the last decade, increasing threefold as a percentage of gdp. 2 for the euro area over the last decade, the stock of outward and inward foreign direct investment has virtually doubled as a percentage of gdp since 1999. ultimately, these globalisation forces provide the scope for many