Paul Volcker and his colleagues on the Federal Open Market Committee deserve enormous credit both for recognizing the crucial importance of achieving low and stable inflation and for the courage and perseverance with which they tackled America’s critical inflation problem. I could say much more about Volcker’s achievement and its lasting benefits, but I am sure that many other speakers will cover that ground.
At a basic level, the effectiveness of monetary policy depends on a stable area-wide banking system; otherwise, the transmission of monetary policy is compromised by the fragmentation of the banking system and divergence in the pass through of policy rates to lending rates across the euro area.