Having said that, I currently see no evidence that the Federal Reserve has fallen behind the curve, and I therefore continue to have confidence in our judgment that a gradual removal of accommodation is likely to be appropriate.
The two observations concern the experience with the Stability and Growth Pact over the past six years. The first is that the SGP did not succeed in preventing the occurrence of excessive deficits in several euro area countries – though I am convinced that those countries’ budgetary positions would have been worse if the Pact did not exist.