There are reasons why the Banking Union may have an impact on the market value of banks. •  The increased confidence in banks based in countries participating in the banking union may increase investors’ interest in them, thus facilitating their funding. •  The core factor is a credible assessment of bank balance sheets.
Inflation expectations were elevated but highly dispersed and reasonably stable. For a flexible-inflation-targeting central bank facing persistently sub-par growth, there was a robust case against responding to these price developments. But that did not make the choice free. The policy had costs. And the benefits disappointed. One of these costs was shifting to a much higher level of core inflation.