jean - claude trichet : global economic governance and euro area economic governance speech by mr jean - claude trichet, president of the european central bank, at the world policy conference, marrakech, 16 october 2010. * * * ladies and gentlemen, it is a real pleasure to be here in marrakech – a city which, in its history, is a demonstration of the link between economic success and political events and choices. morocco is also an important partner for the eu in the context of the union for the mediterranean and the barcelona process. let me also mention that the ecb and the bank al maghrib have wellestablished bilateral relations, as well as close contacts in a multilateral framework. for example, the ecb and the other eurosystem central banks regularly meet with bank al maghrib and the other central banks of the mediterranean region in the framework of highlevel seminars, in which they discuss economic and financial issues of common interest. * * * let me start by saying a few words about the current economic outlook in the euro area. real gdp in the euro area grew by 1 %, quarter on quarter, in the second quarter of this year. growth has been supported mainly by domestic demand, but also reflects some temporary factors. recent statistical releases and survey evidence generally confirm our expectation of a moderation in the second half of this year in the euro area. therefore, we do not declare victory and we have to remain cautious and prudent. that being said, the positive but modest underlying momentum of the recovery remains in place. annual inflation in the euro area is currently 1. 8 %, and we expect inflation to remain moderate in 2011. very importantly, we note that inflation expectations over the medium to longer term continue to be firmly anchored in line with our definition of price stability. * * * in my remarks today, i will focus on global governance and in particular on the lessons that can be drawn from the extraordinary events of the past two years. i will first elaborate on why we need a set of rules, institutions and international relations that we call “ global governance ”. second, i will analyse how, in hindsight, the existing global governance has fared during the global financial crisis. third, i will deal with the evolution of the system as a response to the crisis, and in particular i will discuss the rise of new key entities in the world economy such as the g20 and the financial stability board, with a view to the

as core inflation is at 1. 5 % in the medium term and the latest reading of long - term inflation expectations ( 5y / 5y ) was at 1. 9 %, we may conclude that the trend in euro area inflation is now in line with the ecb ’ s strategy. logically, on the basis of this data and in line with its revised strategy, the ecb leans on the side of not overreacting. * * * let me now turn more specifically to our strategy review, which was concluded in july. highquality analysis and extensive dialogue between research and policymaking were crucial for reaching substantive, pertinent conclusions going forward. you may compare the strategy review exercise to a major research project with dozens of in - depth seminars, covering key issue areas relevant to the making of monetary policy. we reviewed the definition of price stability, monetary policy instruments and their effectiveness, as well as our communication practices. we also assessed the importance of digitalization, financial stability, globalization, monetary and fiscal policy interactions, and climate change from the perspective of monetary policy. the most important revision to our strategy is the new definition of price stability and how it will be applied in our future decision - making. according to the new strategy, price stability is best maintained by aiming at a 2 % symmetric inflation target over the medium term. the old aim of ‘ below, but close to 2 % ’ was less precise and very much open to interpretation. in particular, the former definition had probably a certain feel of asymmetry, and its ambiguous wording appeared more of a ceiling than a symmetric central target. the new 2 % inflation target is genuinely symmetric, unambiguous, and easy to communicate. symmetry means that the governing council considers both slower and faster inflation to be equally undesirable. the symmetric 2 % inflation target under the new strategy thus serves as a buffer against deflationary risks and provides monetary policy with more space to react to a sharp decline in inflation. obviously, we also want to rein in the costs to the economy from a too high rate of inflation. and we have the tools to do it effectively, if and when needed. this change in the price stability definition is clearly reflected in our forward guidance. as decided at our monetary policy meeting in september, the governing council expects the key ecb 2 / 4 bis central bankers'speeches interest rates to remain at their present or lower levels until it sees inflation reaching 2 % durably, and