Furthermore, we will have to face the reality of the flattening of the Phillips curve – the slower responsiveness of prices to the improvement of the output gap – due to globalization and the progress in IT (Chart 7). Thus, the achievement of the price stability target becomes increasingly challenging.
I would advance the following: We are witnessing a fundamental reassessment of the value of virtually every asset everywhere in the world. Short-term funding markets have become suspect. Roll-overs of existing maturities reveal systematic underpricing of once seemingly benign risks – credit, liquidity, counterparty, and even sovereign risks – which demand reassessment and recalibration.