Despite some instances of heightened volatility, financial markets have functioned reasonably well, and risk spreads have stayed contained, although uncertainty about upcoming elections has likely led to some increase in French and Italian sovereign spreads in recent months.
Fears of disinflation also appear to have abated: Measures of inflation compensation based on 5-to-10-year-ahead inflation swaps, which fell to 1-1/4 percent in the middle of last year, have recently moved up to 1-3/4 percent.