to prevail. in particular, the recent volatility in financial markets, notably also in the exchange rate, deserves close monitoring with regard to its possible implications for the medium - term outlook for price stability. therefore, while the strong momentum of the euro area economy has clearly strengthened our confidence in the inflation outlook, patience and persistence with regard to monetary policy is still needed for inflation to sustainably return to levels of below, but close to, 2 %. in fact, the evolution of inflation remains crucially conditional on an ample degree of monetary stimulus provided by the full set of our monetary policy measures : our net asset purchases, the sizeable stock of acquired assets and the forthcoming reinvestments, and our forward guidance on policy interest rates. the relevance of central clearing for monetary policy and the role of the central bank of issue let me now turn to the interactions between financial market infrastructures and monetary policy, which you have chosen as a topic for today ’ s hearing. this is indeed an important and timely issue, particularly in relation to central clearing, on which i will focus today. allow me to recall the important role played by central counterparties – or ccps – in financial markets : by interposing themselves in a network of financial transactions, ccps reduce counterparty credit risk and increase market transparency. however, under crisis conditions, the disruption of clearing activities can have a significant negative impact on our ability to conduct monetary policy tasks. for instance, it may cause significant liquidity strains for ccp users, which in many cases are also our monetary policy counterparties. in particular, these strains may arise from large and sudden calls to provide additional resources to a ccp under stressed market conditions. in addition, disturbances affecting a ccp active in the money markets can 2 / 4 bis central bankers'speeches impair normal monetary policy transmission channels. these are just two examples of the links between the operation of ccps and the transmission of monetary policy. while these links are not new, they now warrant closer attention for two reasons. first, the financial system has come to rely more on central counterparties. the introduction of mandatory central clearing requirements in response to the crisis has made financial markets safer and more transparent. this is in large part thanks to the european parliament ’ s push for stronger financial regulation, such as the european market infrastructure regulation ( emir ). while this strengthening is of course welcome, it also means that ccps have become more systemic. second, the united kingdom ’

may be fading. public opinion polls, which recorded a marked increase in fear of job loss from 1991 to 1995, a period of tightening labor markets, now indicate a partial reversal of that uptrend. to be sure, there is still little evidence of wage acceleration. to believe, however, that wage pressures will not intensify as the group of people who are not working, but who would like to, rapidly diminishes, strains credibility. the law of supply and demand has not been repealed. if labor demand continues to outpace sustainable increases in supply, the question is surely when, not whether, labor costs will escalate more rapidly. of course, a fall - off in the current pace of demand for goods and services could close the gap and avoid the emergence of inflationary pressures. so could a sharp improvement in productivity growth, which would reduce the pace of new hiring required to produce a given rate of growth of real output. productivity growth in manufacturing, as best we can measure it, apparently did pick up some in the third quarter and the broader measures of productivity growth have exhibited a modest quickening this year. certainly, the persistence, even acceleration, of commitments to invest in new facilities suggests that the actual profitability of recent past investments, and by extension increased productivity, has already been achieved to some degree rather than being merely prospective. however, to reduce the recent two million plus annual rate of job gains to the one million rate consistent with long - term population growth would require, all else equal, a full percentage point increase in the rate of productivity growth. while not inconceivable, such a rapid change is rare in the annals of business history, especially for a mature industrial society of our breadth and scope. clearly, impressive new technologies have imparted a sense of change in which previous economic relationships are seen as being less reliable now. improvements in productivity are possible if worker skills increase, but gains come slowly through experience, education, and on - the - job training. they are also possible as capital substitutes for labor, but that is limited by the state of current technology. very significant advances in productivity require technological breakthroughs that alter fundamentally the efficiency with which we use our labor and capital resources. but at the cutting edge of technology, where america finds itself, major improvements cannot be produced on demand. new ideas that matter are hard won. short of a marked slowing in the demand for goods and services and, hence, labor - - or a