The steps taken by central banks have taken them into, up to now, uncharted territory. Interest rates have been reduced to very low levels by historical standards, clearing the way for significantly lower bank interest rates (although with a significant time-lag), thus supporting credit demand from households and firms. At the same time, non-conventional measures have been adopted with the aim of bringing abnormally high money market spreads down and ensuring a proper transmission of the monetary policy impulse. These exceptional measures have had important effects on macroeconomic and financial stability, and improved the overall conditions on financial markets. 19 In particular, they have helped to “liquefy” assets that could otherwise have caused the insolvency of many financial institutions. More generally, they have helped to restore confidence by reducing uncertainty. In addition, they have prevented contagion effects that can arise in the financial system as a result of the inter-connectedness between various market participants. The monetary policy intervention also helped to restore the profitability of banks as the fall in short-term interest rates steepened the yield curve, to the benefit of the banking system, which usually funds itself in the short term in order to provide credit for longer terms. This profitability also helped to support the flow of credit to the economy. Financial measures have also been adopted, such as increased deposit insurance, guarantees for bank liabilities, and injections of capital. In addition, fiscal budgets have supported aggregate demand via automatic stabilisers and expansionary measures.
François Villeroy de Galhau: Challenges and opportunities in Europe and beyond Keynote address by Mr François Villeroy de Galhau, Governor of the Bank of France, at the 2018 Paris Europlace International Financial Forum, Tokyo, 19 November 2018. * * * It is a pleasure to be with you again in Tokyo, with my colleague and friend Governor Kuroda. This 22nd edition of the annual International Financial Forum is focused on the disruptive world that Europe is facing. But beyond disruption, the world is also increasingly uncertain, with tensions coming from protectionism, rising oil prices, a controversial policy-mix in the United States, and equity market valuations that remain volatile; but also, within Europe itself, the Italian fiscal policy and Brexit. So in my remarks today, allow me to elaborate on these two dimensions: the challenges and opportunities for Europe, but also the global questions that we have to address collectively. **  1. Our European challenges and opportunities Let me first speak about the gradual normalisation of our monetary policy. The broad-based expansion of the euro area economy is continuing, although at a more moderate pace. Despite a slowdown in the first half of the year, GDP growth is still expected above potential in 2018, even if the output gap is closed. 9.2 million jobs have been created since 2013 and the unemployment rate has fallen from 12.1% to 8.1%.