The spread of the forward rates embedded in the nominal yield curve from five to ten years out over the forward rates derived from the indexed yield curve has widened more than 50 basis points since late March. Changes in this spread can be a misleading indicator of inflation expectations.
I thank in particular Professor Marcellino for this opportunity to share my thoughts on Optimal Currency Areas (OCA) in general and the challenges of European Monetary Union (EMU) in particular. Some countries in the euro area face a combination of high levels of indebtedness, budget deficits and weak or absent growth.